1. FED CHALLENGE MEETING
OCTOBER 15, 2012
WEEK 4
Review of News Articles / Publications

2. FED RESERVE REPORT – JULY 17, 2012
SUMMARY OF ECONOMIC PROJECTIONS

3. FED RESERVE REPORT – JULY 17, 2012
ECONOMIC ACTIVITY

5. APPROPRIATE MONETARY POLICY
 Low levels of Fed Funds Rate appropriate until late 2014
 First increase not warranted until 2015
 Prior to increase Committee to cease reinvesting some or
all principal payments on securities in System Open
Market Account

6. UNCERTAINTY AND RISK

7. OTHER ARTICLES
 CNN on QE3 – $40 billion in mortgage-backed securities
each month.
 Put downward pressure on LT interest rates
 Republicans caution potential inflation
 1st and 2nd QE fueled stock market gains –banks not
eager to lend out money regularly
 Banks sitting on $1.6 trillion in reserves

8. FRB MATURITY EXTENSION PROGRAM
 Fed Reserve selling shorter-term Treasury
securities to buy Longer-term securities
 Downward pressure on LT interest rates
 To hopefully affect mortgages, corporate bonds,
loans to households
 May put upward pressure on Short-term yield
 To provide additional stimulus
 **Can this complicate exit strategy?

9. THE FED RESERVES BALANCE SHEET
 System Open Market Account (“SOMA”) portfolio
 More than nearly tripled