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Fed Challenge09
 

Fed Challenge09

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Part of the 2009 2nd Place FRBNY College Fed Challenge Presentation

Part of the 2009 2nd Place FRBNY College Fed Challenge Presentation

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    Fed Challenge09 Fed Challenge09 Presentation Transcript

    • Federal Reserve Challenge Presentation
      Federal Reserve Bank of New York – November 20, 2009
    • Agenda
      • Global Economic Conditions
      • Domestic Economic Conditions
      • The Real Estate Crisis
      • Financial Markets
      • Forecast
      • Contemporary Monetary Policy Challenges
      • Monetary Policy Recommendation
      • Draft FOMC Policy Directive
      • Question & Answer Session
      Federal Reserve Challenge
    • International Economic Conditions
      Source: International Monetary Fund
      Federal Reserve Challenge
    • International Economic Conditions
      Federal Reserve Challenge
    • International Economic Conditions
      Source: U.S. Department of Commerce Bureau of Economic Analysis, U.S. Census Bureau
      Federal Reserve Challenge
    • International Economic Conditions
      Source: Netherlands Bureau of Economic Policy Analysis
      Federal Reserve Challenge
    • International Economic Conditions
      Amounts Outstanding
      Source: Federal Reserve Board (H.4.1)
      Federal Reserve Challenge
    • International Economic Conditions
      Source: U.S. Census Bureau, Office of Management and Budget
      Federal Reserve Challenge
    • International Economic Conditions
      Sources: European Central Bank, Norges Bank, Sveriges Riksbank, Central Bank of Russia, People’s Bank of ChinaKorea Federation of Banks, Financial Times
      Federal Reserve Challenge
    • International Economic Conditions
      Source: U.S. Department of Commerce Bureau of Economic Analysis
      Federal Reserve Challenge
    • International Economic Conditions
      Source: Federal Reserve Bank of St. Louis, Federal Reserve Bank of New York
      Federal Reserve Challenge
    • International Economic Conditions
      Up 0.25%
      Up 0.25%
      Up 0.25%
      Source: Norges Bank, Reserve Bank of Australia, Bank of Israel
      Federal Reserve Challenge
    • International Economic Conditions
      Central Bank Cooperation
      Federal Reserve Challenge
    • International Economic Conditions
      Source:Organization for Economic Cooperation & Development
      Federal Reserve Challenge
    • Domestic Economic Conditions
      Source: U.S. Department of Labor: Bureau of Labor Statistics
      Federal Reserve Challenge
    • Domestic Economic Conditions
      Source: U.S. Department of Labor: Bureau of Labor Statistics
      Federal Reserve Challenge
    • Domestic Economic Conditions
      Source: U.S. Department of Labor Bureau of Labor Statistics, Automatic Data Processing
      Federal Reserve Challenge
    • Domestic Economic Conditions
      Source: U.S. Department of Labor :Bureau of Labor Statistics
      Federal Reserve Challenge
    • Domestic Economic Conditions
      Monthly Mass Layoffs
      Source: U.S. Department of Labor: Bureau of Labor Statistics
      Federal Reserve Challenge
    • Domestic Economic Conditions
      Employment Cost Index (%∆quarterly)
      Source: U.S. Department of Labor: Bureau of Labor Statistics
      Federal Reserve Challenge
    • Domestic Economic Conditions
      Source: U.S. Department of Labor: Bureau of Labor Statistics
      Federal Reserve Challenge
    • Domestic Economic Conditions
      Source: U.S. Department of Commerce: Bureau of Economic Analysis
      Federal Reserve Challenge
    • Domestic Economic Conditions
      Source: U.S. Department of Commerce Census Bureau
      Source: U.S. Department of Commerce Bureau of Economic Analysis
      Federal Reserve Challenge
    • Domestic Economic Conditions
      Source: U.S. Department of Commerce: Bureau of Economic Analysis
      Federal Reserve Challenge
    • Domestic Economic Conditions
      Source: U.S. Department of Commerce: Bureau of Economic Analysis
      Federal Reserve Challenge
    • Domestic Economic Conditions
      Sources: The Conference Board, University of Michigan Survey Research Center
      Federal Reserve Challenge
    • Domestic Economic Conditions
      Source: U.S. Department of Commerce Bureau of Economic Analysis
      Federal Reserve Challenge
    • Domestic Economic Conditions
      Source: U.S. Department of Commerce Bureau of Economic Analysis
      Federal Reserve Challenge
    • Domestic Economic Conditions
      Non-residential Investment % Contribution to GDP Growth
      Source: U.S. Department of Commerce Bureau of Economic Analysis, Bureau of the Census
      Federal Reserve Challenge
    • Domestic Economic Conditions
      Sources: Congressional Budget Office, U.S. Department of Labor Bureau of Labor Statistics, U.S. Department of Commerce Bureau of Economic Analysis
      Federal Reserve Challenge
    • Domestic Economic Conditions
      Inventory to Sales Ratio
      Source: U.S. Department of Commerce Bureau of Economic Analysis, Bureau of the Census
      Federal Reserve Challenge
    • Domestic Economic Conditions
      Federal Reserve Board (G.17) Institute for Supply Management
      Federal Reserve Challenge
    • Domestic Economic Conditions
      U.S. Department of Labor: Bureau of Labor Statistics
      Federal Reserve Challenge
    • Domestic Economic Conditions
      Core Inflation (%∆ y/y)
      Source: U.S. Department of Labor: Bureau of Labor Statistics, U.S. Department of Commerce: Bureau of Economic Analysis
      Federal Reserve Challenge
    • Domestic Economic Conditions
      Source: Federal Reserve Board (H.3, H.6)
      Federal Reserve Challenge
    • Real Estate Markets
      Source: U.S. Department of Commerce Bureau of Economic Analysis
      Federal Reserve Challenge
    • Real Estate Markets
      Sources: U.S. Department of Commerce: Census Bureau
      Federal Reserve Challenge
    • Real Estate Markets
      Source: National Association of Realtors
      Federal Reserve Challenge
    • Real Estate Markets
      Source: Federal Home Loan Mortgage Corporation
      Federal Reserve Challenge
    • Real Estate Markets
      Source: U.S. Department of Commerce, CensusBureau
      Federal Reserve Challenge
    • Real Estate Markets
      Source: Standard and Poors
      Federal Reserve Challenge
    • Real Estate Markets
      Source: Federal Reserve Board (H.4.1)
      Federal Reserve Challenge
    • Real Estate Markets
      Source: Federal Deposit Insurance Corporation
      Federal Reserve Challenge
    • Financial Markets
      1 Month OIS /LIBOR Spread
      Source: Reuters, Chicago Board of Trade
      Federal Reserve Challenge
    • Financial Markets
      Source: Federal Reserve Bank of New York, Reuters
      Federal Reserve Challenge
    • Financial Markets
      Source: Federal Reserve Board (H.4.1)
      Federal Reserve Challenge
    • Financial Markets
      Source: Reuters
      Federal Reserve Challenge
    • Financial Markets
      Source: Federal Deposit Insurance Corporation
      Federal Reserve Challenge
    • Financial Markets
      Source: Federal Reserve Bank of St. Louis
      Federal Reserve Challenge
    • Financial Markets
      Source: Federal Reserve Board
      Federal Reserve Challenge
    • Financial Markets
      Source: U.S. Department of Commerce Bureau of Economic Analysis, Federal Reserve Board (G.19)
      Federal Reserve Challenge
    • Financial Markets
      Source: Federal Reserve Bank of St. Louis, U.S. Department of the Treasury
      Federal Reserve Challenge
    • Financial Markets
      Federal Reserve Challenge
    • Financial Markets
      Source: Federal Reserve Bank of St. Louis
      Federal Reserve Challenge
    • Financial Markets
      Source: Federal Reserve Bank of St. Louis
      Federal Reserve Challenge
    • Financial Markets
      Source: Federal Reserve Board, Macroeconomic Advisers, Haver Analytics
      Federal Reserve Challenge
    • Monetary Policy Discussion
      GDP (%∆y/y)
      Unemployment Rate (%)
      Core PCE Deflator
      Source: Macroeconomic Advisors
      Federal Reserve Challenge
    • Monetary Policy Discussion
      27% of ARRA
      Aggregate Demand
      Federal Reserve Challenge
    • Monetary Policy Discussion
      Source: Federal Reserve Board (H.4.1)
      Federal Reserve Challenge
    • Blockage
      Opening
      Banks
      Fed
      Facilities
      Libor
      Commercial & Industrial
      Consumer, Mortgage Loans
      Deposits
      Banks w/
      Excess Loan
      Demand
      Commercial, Consumer,
      Mortgage Loans
      Savers &
      Investors
      Securities-
      Funded
      Lending
      Borrowers
      Financial-Issued ABS
      Commercial Paper & Bonds
      Direct Investment
      Commercial Paper, Bonds
      Securities
      Market
    • Monetary Policy Discussion
      Source: Federal Reserve Board (H.4.1)
      Federal Reserve Challenge
    • Blockage
      Opening
      Action to Revive the Commercial Paper Market:
      …To Temporarily Inserting Two Bypasses
      Commercial, Consumer,
      Mortgage Loans
      Savers &
      Investors
      Securities-
      Funded Loan
      Originators
      Borrowers
      ABS Paper
      Treasuries
      Fed &
      Treasury
      Commercial Paper
      Commercial
      Paper ABS
      Insurance
      Directly Buy Commercial Paper
      Commercial Paper (Direct)
      Securities
      Market
      Money
      Market Funds
      Buy Commercial Paper
    • Monetary Policy Discussion
      Source: Federal Reserve Board (H.4.1)
      Federal Reserve Challenge
    • Monetary Policy Discussion
      Source: Federal Reserve Board (H.4.1)
      Federal Reserve Challenge
    • Monetary Policy Discussion
      Federal Reserve Challenge
    • Monetary Policy Recommendation
      Federal Reserve Challenge
    • Monetary Policy Recommendation
      We recommend that the Federal Open Market Committee maintain the target range for the Federal Funds rate at 0-0.25% at its next meeting
      Federal Reserve Challenge
    • “V” Shaped Recovery
      Federal Reserve Challenge
      Rapid rebound in GDP Growth
      Continued Financial Improvement
      Credit Growth
      Reduction in Excess Bank Reserves
      Rapid growth in IP, Capacity Utilization, and Core PCE
      Strong Nonfarm Payroll Growth beginning within a few months
      Would require rapid monetary policy tightening
      Rate increases of large magnitudes (50bp or more)
      Possible emergency FOMC meetings to accelerate tightening cycle
    • “L” Shaped Recovery
      Federal Reserve Challenge
      Continued weakness in credit and monetary growth
      Sluggish growth in industrial production, capacity utilization, and GDP
      Weak consumer spending
      Nonfarm payrolls continue to improve slowly
      Consumer Confidence & Sentiment Remain Low
      Monetary policymakers would have time to enact a measured exit strategy
      Small rate increases
      Rate increases spread over more than one meeting
    • “W” Shaped Recovery
      Federal Reserve Challenge
      Recovery falters, possibly due to another financial or commodity price shock
      Mix of positive and negative indicator releases become increasingly negative
      Consumer and Business confidence falls
      Nonfarm payroll numbers rapidly deteriorate
      Deflation becomes a significant risk
      Contraction begins while monetary policy is still accomodative
      Re-engage in credit easing, expand to new types of assets
      Expand lending facilities and create new ones
      Set negative nominal interest rate for excess reserves
    • Recommendation for Policy Directive
      Please turn to the FOMC Policy Directive Packet
      Federal Reserve Challenge
    • Monetary Policy Recommendation
      Expected Unemployment Rate (%)
      Federal Reserve Challenge