june 18-19, 2013 190 of 233 authorized for public …...2013/06/19 · 05/01/12 09/01/12 01/01/13...

Authorized for Public Release

Appendix 1: Materials used by Mr. Potter

June 18-19, 2013 190 of 233

Class II FOMC – Restricted (FR)

Material for Briefing on Financial Developments and Open Market Operations

Simon Potter June 18, 2013

June 18-19, 2013 Authorized for Public Release 191 of 233

Class II FOMC – Restricted (FR) Exhibit 1

1.5

2.0

2.5

3.0

3.5

05/01/10 05/01/11 05/01/12 05/01/13

Percent BoardBarclays*Median Dealer Modal Expectation

Board Avg.Since 1999

Sept. FOMC

Apr.-May FOMC

(5) Five-Year, Five-Year Forward Breakeven Inflation Compensation

*Barclays measure adjusted for the intermeeting roll to a newly issued 5-yearTIPS. The unadjusted measure would currently be 8 bps lower.Source: Barclays, Federal Reserve Board of Governors, Federal Reserve Bank of New York Survey

1.5

2.0

2.5

3.0

3.5

4.0

4.5

05/01/12 09/01/12 01/01/13 05/01/13

Percent Primary Rate*Secondary Rate**

Sept. FOMC

Apr.-May FOMC

(6) Primary and Secondary Mortgage Rates

*FHLMC 30-year survey rate.**FNMA 30-year current coupon yield.Source: FHLMC, Bloomberg

0.250.500.751.001.251.501.752.002.252.50

05/01/12 09/01/12 01/01/13 05/01/13

Percent U.S.U.K.GermanyJapan FOMC

JEC

(1) Ten-Year Sovereign Yields

Source: Bloomberg

1

2

3

4

5

Change inView ofFOMCPolicy

FOMCPolicy

Uncertainty

StrongerGrowth

Prospects

GlobalFactors

HigherInflationOutlook

Other/Technical

Importance AverageInterquartile Range

*Responses are expressed in terms of importance of each factor, where 1 is not important and 5 is very important.

Source: Federal Reserve Bank of New York Survey

(2) Factors Contributing to Ten-Year Yield Increase Over Intermeeting Period*

05

101520253035

H22013

H12014

H22014

H12015

H22015

H12016

H22016

≥ H1 2017

Percent December 2012 Flash Survey**April 2013 SurveyJune 2013 Survey

(4) Probability Distribution of First Increase in Federal Funds Target Rate*

*Average probabilities from dealer responses.**Flash survey conducted after December 2012 FOMC meeting. Source: Federal Reserve Bank of New York Survey

0

20

40

60

80

100

120

1 2 3 4 5 6 7 8 9 10

Start Year

BPS

(3) Changes in One-Year Forward Real Yields Over Intermeeting Period

Source: Federal Reserve Board of Governors


https://www.federalreserve.gov/monetarypolicy/files/FOMC20130619meeting.pdf

Exhibit 2 Class II FOMC – Restricted (FR)

0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

01/01/11 01/01/12 01/01/13 01/01/14

Percent Main Refinancing RateEONIAMarket-Implied EONIA Path*Deposit Rate

Post-May ECB (05/02/13)

(12) ECB Policy Rates

*Risk-neutral projection based on forward EONIA swaps. Source: ECB, Bloomberg, Barclays

Current

20

30

40

50

60

70

80

05/01/12 09/01/12 01/01/13 05/01/13

BPS/Year

April BoJ

JEC

(11) Japanese Three-Month, Ten-Year Swaption Implied Volatility

Source: Bloomberg

EUR JPY

GBP

AUD

CAD NOK

BRL

MXN

INR

PHP THB

PLN TRY

ZAR

MYR KRW

-12-10

-8-6-4-20246

0 2 4 6 8 10

Percent

Current 3-Month Deposit Rate (Percent)

(9) Currency Performance Against U.S. Dollar Over Intermeeting Period by Deposit Rate

Source: Bloomberg

(7) Risk Asset Performance

Source: Bloomberg, Barclays, J.P. Morgan

80

90

100

110

120

05/01/12 09/01/12 01/01/13 05/01/13

Indexed to 05/01/12

EM Local BondsEM Equity

FOMC JEC

(8) Emerging Market Indices*

*Indices not hedged for foreign exchange exposure. Source: Bloomberg, Markit, MSCI

Change on ChangePeriod YTD

Credit Spreads to Treasury10-Year Swap +0 bps +12 bpsIG Debt +8 +2HY Debt +52 -27ABS +4 +8Leveraged Loans -2 -68CMBS +5 +19

Equity IndicesS&P 500 Index +1.8% +14.1%FTSE All-World Ex-U.S. Index -4.6% +0.9%

Appreciation Against Dollar

(10) Japanese Asset Price Changes

*Recent peak of Nikkei index. **One-month at-the-money implied volatility. ***Yield on JGBi maturing 06/10/18. ****10-year breakeven swap rate. Source: Bloomberg, Barclays

Level

Change Since Recent Peak*

(05/22/13)

Change Since Early Elections

(11/13/12)Nikkei Index 12,687 -18.8% +46.5%

Implied Vol. 41.6% +14 ppts +24 pptsDollar-Yen 94.31 -8.6% +18.8%

Implied Vol.** 16.3% +4 ppts +10 ppts

5-Year Real Yield*** -0.95% +47 bps -52 bps10-Year BEI**** 1.02% -16 bps +65 bps



Exhibit 3 Class II FOMC – Restricted (FR)

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

05/01/12 09/01/12 01/01/13 05/01/13

Multiple

FOMC New Program

(15) Coverage Ratio for Treasury Purchase Operations*

*30-day moving average. Source: Federal Reserve Bank of New York

-250

-200

-150

-100

-50

0

50

100

150

05/01/12 09/01/12 01/01/13 05/01/13

BPS 3.0% Front Month3.5% Front Month

Fails Charge

Sept. FOMC

Apr.-May FOMC

(17) Dollar Roll Implied Financing Rates*

*30-year FNMA dollar rolls. Front month is currently July-August roll. Source: J.P. Morgan

0

20

40

60

80

100

05/01/12 09/01/12 01/01/13 05/01/13

Percent 2.5% 3.0%3.5% 4.0%

JEC

(16) Thirty-Year MBS Purchase Allocations (As a Percent of Total)

Source: Federal Reserve Bank of New York

Sept. FOMC

Apr.-May FOMC

0

2

4

6

8

10

12

05/01/12 09/01/12 01/01/13 05/01/13

BPS Treasury**MBS*** JEC

(14) Intraday Trading Range*

*10-day moving average. **10-year on-the-run Treasury. ***30-year FNMA current coupon. Source: Bloomberg

FOMC

(13) Outcome-Based Purchase Operations (Through 06/14/13)

*Treasury ownership is as percent of outstanding with 4-30 years to maturity. MBS ownership is as percent of TBA-eligible outstanding. **Treasury duration is modified duration. MBS duration is effective duration. ***Outright transactions, including reinvestments, since 09/13/12. Source: Federal Reserve Bank of New York

Treasury MBS

Par Amount ($ Bil.) 244 373 Par Amount ($ Bil.)

Total Holdings ($ Bil.) 1,898 1,326 Total Holdings ($ Bil.)

Ownership* (%) 34 35 Ownership* (%)

Duration of Purchases** 9.8 5.8 Duration of Purchases**

Number of Operations 99 3,582 Number of Transactions***

0.0

0.1

0.2

0.3

0.4

0.5

05/01/12 09/01/12 01/01/13 05/01/13

Percent Treasury GC Repo RateFederal Funds Effective Rate

(18) Overnight Interest Rates

Source: Federal Reserve Bank of New York

Peak Bills Outstanding

in FY2013



Exhibit 4 (Last) Class II FOMC – Restricted (FR)

0

20

40

60

80

100

Jun2013

Jul2013

Sep2013

Oct2013

Dec2013

Jan2014

Mar2014

Apr2014

Jun2014

$ Billions April Median*June MedianInterquartile Range

*Sep. 2013, Oct. 2013, Jan. 2014, Mar. 2014 and Jun. 2014 medians derived from a separate question in the April survey. Source: Federal Reserve Bank of New York Survey

(19) Median Total Monthly Purchase Pace Announced at FOMC Meetings

2,400

2,800

3,200

3,600

4,000

4,400

2011 2012 2013 2014 2015 2016 2017 2018

$ Billions MEP & Reinvestments OnlyGrowing PortfolioStable PortfolioShrinking PortfolioApril Survey

(20) SOMA Portfolio Holdings (Median Forecasts)

Source: Federal Reserve Bank of New York Survey, Bureau of Labor Statistics

Current

First Change in Pace Purchases

End First Rate Hike

U3: 7.3% PCE: 1.3% NFP Level: 137m

Avg. NFP: 209K

End- Avg. NFP: 203K

U3: 7.0% PCE: 1.7% NFP Level: 138m April Survey NFP Peak: 138m

0

10

20

30

40

50

60

< $758 Billion Purchases(1/2 Survey Median)

≥ $1,373 Billion Purchases (Survey Median)

Percent <7.3% End-2013 Unemployment (44%)7.3-7.5% End-2013 Unemployment (38%)>7.5% End-2013 Unemployment (18%)

(21) Probability of Purchase Program Sizes Under Alternative Unemployment Paths*

*Average dealer probability assigned to unemployment outcomes in parentheses. Source: Federal Reserve Bank of New York Survey



Appendix 2: Materials used by Messrs. Laubach, Gruber, and Campbell


Class II FOMC – Restricted (FR)

Material for

Staff Presentation on the Economic and Financial Situation

Thomas Laubach, Joseph W. Gruber, Sean Campbell June 18, 2013


Class II FOMC - Restricted (FR) Exhibit 1

Near-term Developments

0

1

2

3

4

5

6

0

1

2

3

4

5

6Percent change, annual rate

Real PCE

Q1 Q2 Q3 f. Staff forecasts.

f f

sales

PCE-Relevant Nominal Retail Sales Mar. Apr. MayCurrent 0.2 0.2 0.3(Jun. TB) (.2) (-.1) (.3)

Apr. TBJun. TBPost-retail

40

50

60

70

80

90

100

40

50

60

70

80

90

100Index, 1966 = 100

Consumer Sentiment: Michigan Survey

2007 2008 2009 2010 2011 2012 2013

June

Avg. value since 1978

24

27

30

33

36

39

24

27

30

33

36

39 Billions of dollars

Nondefense Capital Goods ex. Aircraft*

2008 2009 2010 2011 2012 2013 *Three-month moving averages. Weighted by share of totalshipments that is purchased for private business investment. f. Staff forecasts.

Apr.

f f

Real E&S Growth (Percent) Q1 Q2 Q3 Current 4.6 2.0 5.8(Apr. TB) (4.6) (1.6) (6.2)

Shipments (weighted)New orders (weighted)

20

30

40

50

60

70

20

30

40

50

60

70 Diffusion index

2007 2008 2009 2010 2011 2012 2013

Business Conditions Indexes

* PMI (manufacturing) and NMI (nonmanufacturing) indexes. Note: The shaded area is the range of the available headlineindexes from the regional manufacturing surveys.

May

Manufacturing*Non-manufacturing*

Near-term Outlook for Real GDP(Percent change, annual rate)

2013 2013

Q1 Q2f H2f

1. Real GDP 2.1 2.4 2.7 2. (Jun. TB) (2.2) (1.8) (2.9) 3. (Apr. TB) (3.1) (1.5) (2.8)

f. Staff forecasts.

-2

0

2

4

6

8

10

-2

0

2

4

6

8

10Percent change, annual rate

Real GDP Forecasts from the Factor Models

2012 2013 Note. The blue shaded area encompasses the 68% confidenceinterval.

Factor modelsJune TB



Latest Data(Monthly change, thousands of employees)

2013 2013

Q1 Apr. May

1. Total nonfarm payroll employment* 207 149 175 2. (Apr. TB) (168) (153) (154)

3. Private* 212 157 178 4. (Apr. TB) (171) (160) (160)Memo:

5. Unemp. rate 7.7 7.5 7.6 6. (Apr. TB) (7.7) (7.6) (7.6)

*Quarterly figures are average monthly changes.

0

1

Key Labor Market Metrics

Labor Market Data and Projections

Estimate/Projection for

Aug. 2012 2013:Q4 Diff*

Total payroll employment (millions) 1. Jun. TB 133.9 136.6 2.7 2. Sept. TB** 133.3 135.5 2.2

Unemployment rate (pct.) 3. Jun. TB 8.1 7.3 -0.8 4. Sept. TB** 8.1 8.0 -0.1

Employment/population ratio (pct.) 5. Jun. TB 58.4 58.7 0.3 6. Sept. TB** 58.3 58.6 0.2

*Value is calculated by subtracting Aug. 2012 value from2013:Q4 value. **Aug. 2012 values as published by BLS in Sept. 2012.

4.5

5.5

6.5

7.5

8.5

9.5

10.5

4.5

5.5

6.5

7.5

8.5

9.5

10.5Percent

Unemployment Rate Forecast

2008 2010 2012 2014 *Staff estimate. **Emergency unemployment compensation andstate-federal extended benefits programs.

Unemployment gap

Natural rate* with EEB**

70% confidence intervalUnemployment rateApr. TBSept. TB

63

64

65

66

67

63

64

65

66

67Percent

Labor Force Participation Rate*

2008 2009 2010 2011 2012 2013 2014 2015 *Published data adjusted by staff to account for changes inpopulation weights.

Labor force participation rateApr. TB

Apr. TBEstimated trendSept. TB

-4

-3

-2

-1

0

1

2

3

4

5

6

-4

-3

-2

-1

0

1

2

3

4

5

6Percentage points

Unemployment and Employment-Population Gaps

2000 2003 2006 2009 2012 2015 *Net of EUC effect.

Sept. TBNegative E/P gap Sept. TB*Unemployment rate gap*Unemployment rate gap*

Increase in payroll employment

Decline in unemployment rate

Rise in employment-to-population ratio




Medium-term Outlook

0

1

Monetary Policy Assumptions

-1

0

1

2

3

4

-1

0

1

2

3

4Percent

2013 2014 2015 2016

Federal Funds Rate

CurrentApr. TB

0

2

4

6

8

10

0

2

4

6

8

10Percent

2008 2010 2012 2014

Interest Rates

Note. Dashed lines are Apr. TB.

BBB corporate

10-year Treasury

40

60

80

100

120

140

160

40

60

80

100

120

140

160Index, 2007:Q1 = 100

2008 2010 2012 2014

Asset Prices

Note. Dashed lines are Apr. TB.

CoreLogic houseprice index

Total U.S. stockmarket index

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5 Contribution to real GDP growth, p.p.

2008 2009 2010 2011 2012 2013 2014 2015

Fiscal Impetus: Total Government

Note: Staff estimates.

0

1

2

3

4

0

1

2

3

4Q4/Q4 percent change

2012 2013 2014 2015

Medium-term Outlook for Real GDP

Apr. TBJun. TBJun. TB

$750 billion of asset purchases in 2013

Federal funds rate lifts off in 2015q2

Following liftoff, more gradual Increase than in April TB.



Consumer Price Index(Percent change)

2013

Mar. Apr. May

1. All items -0.2 -0.4 0.1

2. Energy -2.6 -4.3 0.4

3. Food 0.0 0.2 -0.1

4. Less food and energy 0.1 0.1 0.2

-2

0

2

4

6

-2

0

2

4

6Twelve-month percent change

2008 2009 2010 2011 2012 2013

PCE Prices

Apr.

Total PCECore PCE

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5Dollars per gallon

Crude Oil and Gasoline Prices

2008 2009 2010 2011 2012 2013 2014 2015 *All grades, SA. Dashed lines are Apr. TB.

Brent crude oil spot priceRetail price of gasoline*

1.5

2.0

2.5

3.0

3.5

4.0

1.5

2.0

2.5

3.0

3.5

4.0Percent

2008 2009 2010 2011 2012 2013

Inflation Expectations

Note. Median responses. The SPF projection is for the PCE priceindex.

June

Q2

Michigan, next 5 to 10 yearsSPF, next 10 years

PCE Price Projection(Q4/Q4 percent change)

2012 2013 2014 2015

1. Total 1.6 0.9 1.4 1.6 2. (Apr. TB) (1.6) (0.9) (1.4) (1.6)

3. Energy 3.2 -5.0 -0.9 -0.9 4. (Apr. TB) (3.2) (-5.0) (-0.9) (-0.9)

5. Food 1.1 1.2 0.9 1.4 6. (Apr. TB) (1.1) (1.2) (0.9) (1.4)

7. Core 1.5 1.2 1.6 1.8 8. (Apr. TB) (1.5) (1.2) (1.6) (1.8) -3

-2

-1

0

1

2

3

4

-3

-2

-1

0

1

2

3

4Percent

Inflation and Inflation Expectations in Japan

1998 2002 2006 2010 2014

12-month CPI5-year moving average CPIConsensus Forecasts, next 5 to 10 years

5-year moving average CPI


Inflation




International Outlook: Emerging Market Economies

80

90

100

110

120

130

140

150

160

170

180

2009 2011 2013

EME ex China Exports*Billions of USD

To U.S.

To AFEs

To China

-6

0

6

12

18

24

30

2009 2011 2013

Chinese Industrial Production*Percent change, a.r.

Q2

* Q2 estimate based on April and May data.

-10

-8

-6

-4

-2

0

2

4

6

8

10

Jun Sep Dec Mar Jun

Net Flows to EME Dedicated FundsBillions of USD

Weekly

Bond fundsEquity funds

2012 2013Source: Emerging Portfolio Fund Research.

2

6

10

14

18

2009 2011 2013 2015

Chinese GDPPercent change, a.r.

Actual

Potential

92

94

96

98

100

102

104

106

108

Jan Feb Mar Apr May Jun

Exchange RatesJan. 4, 2013 = 100

Korean won

Mexican peso

Brazilian real

Note: Dollar/foreign currency.

Real GDP* Percent change, a.r.

2012 2013 2014f 2015f

Q4 Q1 Q2f H2f

1. Total Foreign 2.3 2.0 2.3 3.0 3.3 3.5 April Tealbook 2.1 2.3 2.7 3.0 3.3 3.5

2. Emerging Market Economies 4.8 2.4 3.3 4.3 4.7 4.8 April Tealbook 4.8 3.8 4.2 4.5 4.7 4.8 Of which:3. China 9.5 6.5 6.5 7.9 8.0 7.84. Emerging Asia ex. China 4.7 1.3 3.0 4.0 4.5 4.65. Mexico 2.7 1.8 2.2 3.3 3.9 3.86. Brazil 2.6 2.2 2.8 3.4 3.7 4.0

* GDP aggregates weighted by shares of U.S. merchandise exports.f. Staff forecasts.




International Outlook: Advanced Foreign Economies

-1

0

1

2

3

4

2011 2012 2013 2014 2015

Japanese GDPQ4/Q4 percent change

Sept. 2012 TB

June 2013 TB

32

34

36

38

40

42

44

46

2011 201284

87

90

93

96

99

102

Japanese IndicatorsDiffusion IndexJan. 2011 = 100

Japan

Consumer confidence

IP

2013

0.0

0.2

0.4

0.6

0.8

1.0

1.2

Jan Mar May Jul Sep Nov Jan Mar May

Japanese Yield DecompositionPercent

10-yearyield

10-year averageof expectedshort rate

10-yearterm premium

2012 2013

BOJannouncement

-0.5

0.0

0.5

1.0

1.5

2011 2012 2013 2014 2015

Japanese Inflation*Q4/Q4 percent change

Sept. 2012 TB

June 2013 TB

* Excluding VAT increase.

90

100

110

120

130

140

150

160

170

Oct Nov Dec Jan Feb Mar Apr May Jun

Japanese Equities and YenSeptember 2012 = 100

Nikkei500

Yendepreciation

Japaneseelectionscalled

BOJannouncement

2012 2013

Real GDP* Percent change, a.r.

2012 2013 2014f 2015f

Q4 Q1 Q2f H2f

1. Total Foreign 2.3 2.0 2.3 3.0 3.3 3.5 April Tealbook 2.1 2.3 2.7 3.0 3.3 3.5

2. Advanced Foreign Economies -0.2 1.5 1.3 1.7 2.0 2.3 April Tealbook -0.4 0.8 1.2 1.6 1.9 2.3 Of which:3. Canada 0.9 2.5 2.0 2.2 2.6 2.64. Euro Area -2.3 -0.8 -0.3 0.5 1.3 2.05. Japan 1.2 4.1 3.2 2.8 0.9 1.06. United Kingdom -1.2 1.3 1.0 1.6 2.3 2.6

* GDP aggregates weighted by shares of U.S. merchandise exports.f. Staff forecasts.




Euro Area

-1

0

1

2

3

2011 2012 2013 2014 2015

Euro-Area GDPQ4/Q4 percent change

Sept. 2012 TBJune 2013 TB

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Jan Apr Jul Oct Jan Apr

Euro-Area Five-Year Bond Spreads*Percentage points

BBB industrial

A-rated banks

2012 2013* Over five-year German sovereign.

35

40

45

50

55

60

2008 2009 2010 2011 2012 2013-35

-30

-25

-20

-15

-10

-5

Euro-Area Indicators50+ = expansionPercent balance

Consumerconfidence

Composite PMI

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

2011 2012 2013 2014 2015

Euro-Area Fiscal Impulse*Percent of GDP

* Calculated as change in structural deficit.




Prices and Commodities

-1

0

1

2

3

4

5

6

7

2009 2011 2013 2015

Foreign CPI4-quarter percent change

AFE

EME

30

45

60

75

90

105

120

135

2009 2011 2013 201535

50

65

80

95

110

125

140

155

170

Commodity Price Outlook2008:Q1 = 100USD per barrel

Imported oil

Nonfuel

70

80

90

100

110

120

130

Jan Apr Jul Oct Jan Apr

Oil PricesUSD per barrel

WTI

Brent

Apr.FOMC

2012 2013

8.0

8.5

9.0

9.5

10.0

10.5

11.0

11.5

12.0

12.5

13.0

13.5

2006 2008 2010 2012 2014

U.S. Oil ProductionMillions of barrels per day

DOE forecasts

June 2013

March 2013

March 2012

Source: Department of Energy.

U.S. Energy Boom

Could affect U.S. international competitiveness by decreasing price of energy inputs relative to foreign economies.

Oil production small relative to economy. Accounts for only 1 percent of GDP.

Oil market internationally integrated. Relative price of U.S. oil unlikely to be more than temporarily depressed.

Natural gas market highly segmented. Lower domestic price likely to be more persistent.

500

750

1000

1250

1500

1750

2000

2004 2006 2008 2010 2012

Industrial Electricity PricesUSD per unit ton of oil equivalent

United States

Germany

Source: International Energy Agency.

100

200

300

400

500

600

700

800

2004 2006 2008 2010 2012

Industrial Natural Gas PricesUSD per unit ton of oil equivalent

United States

Germany

Source: International Energy Agency.




U.S. External Sector

-1.2

-1.0

-0.8

-0.6

-0.4

-0.2

-0.0

0.2

0.4

0.6

2005 2007 2009 2011 2013

Trade BalanceBillions of USD

Fertilizer

Basicchemicals

160

180

200

220

240

260

280

2004 2007 2010 2013

Real Oil ImportsBillions chained 2005 USD

-2

-1

0

1

2

3

4

2005 2007 2009 2011 2013-0.8

-0.4

0.0

0.4

0.8

1.2

1.6

Trade BalanceMillions of barrels per dayBillions of USD

Refined petroleum products

Coal

14

16

18

20

22

2008 2009 2010 2011 2012 201380

95

110

125

140

U.S. Real ExportsBillions chained 2009 USDBillions chained 2009 USD

To euro area

To rest ofworld Apr.

Apr.

90

95

100

105

110

115

2009 2011 2013 2015

Broad Real Dollar2008:Q1 = 100

April TB

Trade in Real Goods and Services

2012 2013H2 Q1 Q2 H2f 2014f 2015f

Annualized Percent Change

1. Imports -2.4 0.1 3.0 3.9 4.7 5.3

April Tealbook -2.4 3.3 4.2 4.1 4.7 5.0

2. Exports -0.5 -1.2 5.7 4.0 5.1 6.5

April Tealbook -0.5 3.0 7.2 3.6 5.3 6.8

Contribution to Real GDP Growth (percentage points, a.r.)

3. Net Exports 0.4 -0.2 0.3 -0.1 -0.1 -0.0

April Tealbook 0.4 -0.1 0.3 -0.2 -0.1 0.1

f. Staff forecasts.



Exhibit 10Class II FOMC - Restricted (FR)

Banking Firms

90

110

130

150

170

190

210Index, July 2, 2012 = 100

CMSBAC GSSTT JPM BKWFC

Aug. Oct. Dec. Feb. Apr. June2012 2013

++

++++

+

+

Stock Prices for LISCC Firms

Monthly

June

Mar. QS

+: Denotes latest daily observation on June 17, 2013. Source: Yahoo! Finance.

0

1

2

3

4

5

6

7

Standardized units

CoVaR DIPSES

2013201220112010200920082007

U.S. LISCC Firm Systemic Risk Measures

Monthly Mar. QS

May

Note: Each risk measure is averaged across the six largest LISCC banks(Bank of America, Citigroup, Goldman Sachs, JP Morgan, Morgan Stanley,and Wells Fargo). Each resulting time-series is then re-scaled by itsstandard deviation.

4

5

6

7

8

9

10

11

12

13

14Percent

Tier 1 common ratioTier 1 ratioTier 1 leverage ratio

2013201120092007200520032001

Capital Ratios of SCAP 19 BHCs

Quarterly

Q1

Source: FR Y9-C.

0

4

8

12

16

20

24

28Percent of total assets

20132012201120102009200820072006

U.S. LISSC Firms: Securities and Cash Holdings

Quarterly

Cash

U.S. Treasuries

Other Securities

Source: SNL Financial.

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0Percent

1997 1999 2001 2003 2005 2007 2009 2011 2013Q1

ROE (Right axis) ROA (Left axis)

Source: FRY-9C.

-10

-5

0

5

10

15

20Percent

Profitability of the Top 25 BHCs

• Despite significant holdings of long-term, fixedrate securities, banks are likely positioned tobenefit from a modest (100-200 bps) rate rise

• Insurance companies have increased holdings ofcredit sensitive and less liquid assets inresponse to low interest rates

• Analysis suggests insurance companies are wellpositioned for gradual rate rise

• Larger spike in rates that requires selling ofcredit sensitive and less liquid assets could beproblematic

Interest Rate Risk at Banks and Insurance Firms



Exhibit 11Class II FOMC - Restricted (FR)

Shadow Banking

2000 2002 2004 2006 2008 2010 20120.0

0.5

1.0

1.5

2.0

2.5

3.0

Trillions of dollars

Repo (borrow cash)Reverse repo (lend cash)Net borrowing

Repo Activity by Dealers

Quarterly

Q1

Source: SEC FOCUS reports.

1983 1987 1991 1995 1999 2003 2007 20110.0

0.5

1.0

1.5

2.0

2.5

3.0Percent of Nominal GDP

Share of Nominal GDPMonthly

Margin Credit in Equities

Source: Federal Reserve Board.

Mar.

0

20

40

60

80

100Billions of dollars

2000 2002 2004 2006 2008 2010 2012

U.S. CLO Issuance

2013*

* Data for 2013 includes January through May, at an annual rate. Source: Thomson Reuters LPC LoanConnector.

0

1

2

3

4

5

6

2006 2007 2008 2009 2010 2011 2012 2013

Average Debt Multiples of Highly Leveraged Loans

Q1Apr.(p)

May(p)

Note: Highly leveraged loans are those rated BB+ or lower or those withspreads to LIBOR of more than 225 basis points. (p): Denotes preliminary values. Source: S&P Capital IQ LCD.

0

5

10

15

20

25

30

0

50

100

150

200

250

300

350

400

450Ratio Billons of dollars

Average Assets to Equity (left scale)Total Assets (right scale)

2001 2003 2005 2007 2009 2011 2013

Total Agency REIT Assets

Quarterly

Q1

Source: Bloomberg.

• Regulatory arbitrage

• Increased regulation of swaps

• Exchanges creating economicallyequivalent futures contracts

• Futures have lower initial margin

Swap Futurization



Exhibit 12 (Last)Class II FOMC - Restricted (FR)

Asset Valuations

3

5

7

9

11

13

15

17

Percent

Ten-year High YieldTen-year BBB

201320102007200420011998199519921989

Corporate Bond Yields

Monthly

+

+ June

+ Denotes the latest daily observation. Source: Staff estimates of smoothed yield curves based on Merrill Lynchbond data.

0

2

4

6

8

10

12

14

16Percent

Near-termFar-term

201320102007200420011998199519921989

June

BB Rated Near and Far-Term Corporate Bond Spreads

Monthly

Note: Near-term forward spread between years two and three, andfar-term forward spread between years nine and ten. Source: Staff estimates.

5

10

15

20

25

30

35

40

45

50

Ratio

Cyclically adjusted earnings*12-month backward earnings12-month forward earnings

20132010200720042001199819951992198919861983198019771974197119681965196219591956195319501947

Quarterly

Alternative PE Ratios

*10-year moving average of GAAP earnings Source: Standard & Poors, Thomson Financial

Q1

1990 1995 2000 2005 2010 2015 60

80

100

120

140

160

180

200Index

Apr.

House Price-Rent Ratio

Monthly Phoenix

Miami

USA

Note: Monthly rent values for Phoenix extrapolated from semiannualnumbers. Source: For house prices, Corelogic; for rent data, Bureau of LaborStatistics.

• Prices rising fastest in areas with largestprice declines

• Investors are a source of stable housingdemand

• Underwriting standards remain firm

House Price Developments



Appendix 3: Materials used by Ms. Ihrig


Class I FOMC – Restricted Controlled (FR) Material for

Summary of Economic Projections

Jane Ihrig June 18, 2013


Exhibit 1. Central tendencies and ranges of economic projections, 2013–15 and over the longer run

Change in real GDP

Percent

3

2

1

0

1

2

3

4

5

-

+

2008 2009 2010 2011 2012 2013 2014 2015 Longerrun

Central tendency of projections

Range of projections

Actual

Unemployment rate

Percent

5

6

7

8

9

10

2008 2009 2010 2011 2012 2013 2014 2015 Longerrun

PCE inflation

Percent

1

2

3

2008 2009 2010 2011 2012 2013 2014 2015 Longerrun

Core PCE inflation

Percent

1

2

3

2008 2009 2010 2011 2012 2013 2014 2015 Longerrun

Note: The data for the actual values of the variables are annual.



2013 2014 2015 Longer run

Central Tendency 2.3 to 2.6 3.0 to 3.5 2.9 to 3.6 2.3 to 2.5 March projections 2.3 to 2.8 2.9 to 3.4 2.9 to 3.7 2.3 to 2.5

Range 2.0 to 2.6 2.2 to 3.6 2.3 to 3.8 2.0 to 3.0 March projections 2.0 to 3.0 2.6 to 3.8 2.5 to 3.8 2.0 to 3.0

Memo: Tealbook 2.5 3.4 3.6 2.3 March Tealbook 2.5 3.2 3.6 2.3

2013 2014 2015 Longer run

Central Tendency 7.2 to 7.3 6.5 to 6.8 5.8 to 6.2 5.2 to 6.0 March projections 7.3 to 7.5 6.7 to 7.0 6.0 to 6.5 5.2 to 6.0

Range 6.9 to 7.5 6.2 to 6.9 5.7 to 6.4 5.0 to 6.0 March projections 6.9 to 7.6 6.1 to 7.1 5.7 to 6.5 5.0 to 6.0


2013 2014 2015 Longer run

Central Tendency 0.8 to 1.2 1.4 to 2.0 1.6 to 2.0 2.0 March projections 1.3 to 1.7 1.5 to 2.0 1.7 to 2.0 2.0

Range 0.8 to 1.5 1.4 to 2.0 1.6 to 2.3 2.0 March projections 1.3 to 2.0 1.4 to 2.1 1.6 to 2.6 2.0


2013 2014 2015

Central Tendency 1.2 to 1.3 1.5 to 1.8 1.7 to 2.0 March projections 1.5 to 1.6 1.7 to 2.0 1.8 to 2.1

Range 1.1 to 1.5 1.5 to 2.0 1.7 to 2.3 March projections 1.5 to 2.0 1.5 to 2.1 1.7 to 2.6

Memo: Tealbook 1.2 1.6 1.8 March Tealbook 1.6 1.7 1.7

NOTE: The changes in real GDP and inflation are measured Q4/Q4.

Change in real GDP

Unemployment rate

PCE inflation

Core PCE inflation

Exhibit 2. Economic projections for 2013-2015 and over the longer run (percent)


Exhibit 3. Overview of FOMC participants’ assessments of appropriate monetary policy

1

3

14

1

Appropriate timing of policy firming

Number of participants

1

2

3

4

5

6

7

8

9

10

11

12

13

14

2013 2014 2015 2016

June projections

March projections

Appropriate pace of policy firming Percent

Target federal funds rate at yearend

0

1

2

3

4

5

6

2013 2014 2015 Longer run

June projections

Appropriate pace of policy firming Percent

Target federal funds rate at yearend

0

1

2

3

4

5

6

2013 2014 2015 Longer run

March projections

Note: In the upper panel, the height of each bar denotes the number of FOMC participants who judge that, underappropriate monetary policy, the first increase in the target federal funds rate from its current range of 0 to 1/4 percentwill occur in the specified calendar year. In the middle and lower panels, each circle indicates the value (rounded to thenearest 1/4 percentage point) of an individual participant’s judgment of the appropriate level of the target federal fundsrate at the end of the specified calendar year or over the longer run.



Exhibit 4. Scatterplot of unemployment and PCE inflation rates in the initial year of policy firming (in percent)

PCE

inflation

1.0

1.5

2.0

2.5

5.0 5.5 6.0 6.5 7.0Unemployment Rate

Year of Firming

2013

2014

2015

2016

Note: When the projections of two or more participants are identical, larger markers, which represent one partici-pant each, are used so that each projection can be seen.



Exhibit 5. Uncertainty and risks in economic projections

Uncertainty about GDP growth


2

4

6

8

10

12

14

16

18

20

Lower Broadly Highersimilar

June projections

March projections

Uncertainty about the unemployment rate


2

4

6

8

10

12

14

16

18

20


Uncertainty about PCE inflation


2

4

6

8

10

12

14

16

18

20


Uncertainty about core PCE inflation


2

4

6

8

10

12

14

16

18

20


Risks to GDP growth


2

4

6

8

10

12

14

16

18

20

Weighted to Broadly Weighted todownside balanced upside

June projections

March projections

Risks to the unemployment rate


2

4

6

8

10

12

14

16

18

20


Risks to PCE inflation


2

4

6

8

10

12

14

16

18

20


Risks to core PCE inflation


2

4

6

8

10

12

14

16

18

20




Appendix 4: Materials used by Chairman Bernanke


Class I FOMC – Restricted Controlled (FR)

Page 1 of 1

FOMC STATEMENT—JUNE 2013 ALTERNATIVE B PARAGRAPH 4

4. The Committee will closely monitor incoming information on economic and financial developments in coming months. The Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes. In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives.

OR

4′. The Committee will closely monitor incoming information on economic and financial developments in coming months. The Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. The stance of policy will depend on the incoming data and their implications for the outlook as well as the cumulative progress toward the Committee’s objectives since the program began in September. The paths for the economy that the Committee sees as relatively more likely involve inflation moving back toward its 2 percent objective over time and further improvement in labor market conditions supported by moderate growth that picks up over the next several quarters as the near-term restraint from fiscal policy and other headwinds diminishes. If the economy develops broadly along these lines, the Committee currently anticipates that it would be appropriate to reduce the monthly pace of its asset purchases later this year and, so long as conditions continue to improve about as expected, reduce the pace of purchases in measured steps through the first half of next year, ending purchases about mid-year. If conditions improve faster than expected, the pace of asset purchases could be reduced somewhat more quickly. If the outlook becomes less favorable, on the other hand, or if financial conditions are judged not to be consistent with further progress in labor markets, reductions in the pace of purchases could be delayed. Indeed, if necessary, the Committee would be prepared to employ all of its tools, including an increase in the pace of purchases for a time, to promote a return to maximum employment in a context of price stability. The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes. In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives.


Appendix 5: Materials used by Mr. English


Class I FOMC – Restricted Controlled (FR) Material for

FOMC Briefing on Monetary Policy Alternatives

Bill English June 18-19, 2013


Dealer Survey and Summary of Economic Projections

2012 2014 2016 2018 2020

1500

2000

2500

3000

3500

4000

4500

5000 $ Billion

Alt. AAlt. BAlt. CApril DealerJune Dealer

Total Projected SOMA Security Holdings

Note. Dealer projections are median of responses.

0.0

0.1

0.2

0.3

0.4

0.5

0.6

Percent of Respondents

Jun Jul Sep Oct Dec 2014

Expected Timing of First Pace Reduction: June Dealer Survey

2013 2014 2013 2014 2013 2014

Sept. 2012 7.6 to 7.9 6.7 to 7.3 2.5 to 3.0 3.0 to 3.8 1.6 to 2.0 1.6 to 2.0

June 2013 7.2 to 7.3 6.5 to 6.8 2.3 to 2.6 3.0 to 3.5 0.8 to 1.2 1.4 to 2.0

Summary of Economic Projections: Central Tendencies(Percent)

Unemployment Rate Real GDP Growth PCE Inflation

SEP Date

Risks to the Unemployment Rate: SEP

Weighted to downside

Broadly balanced

Weighted to upside

0

2

4

6

8

10

12

14

16

18

20

Number of Participants

JuneSeptember

Risks to GDP Growth: SEP


Broadly balanced

Weighted to upside

0

2

4

6

8

10

12

14

16

18

20


JuneSeptember

Risks to PCE Inflation: SEP


Broadly balanced

Weighted to upside

0

2

4

6

8

10

12

14

16

18

20


JuneSeptember



MAY FOMC STATEMENT

1. Information received since the Federal Open Market Committee met in March suggests that economic activity has been expanding at a moderate pace. Labor market conditions have shown some improvement in recent months, on balance, but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy is restraining economic growth. Inflation has been running somewhat below the Committee's longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. Longer-term inflation expectations have remained stable.

2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee continues to see downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.

3. To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.


5. To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to ¼ percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6½ percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the


Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.


FOMC STATEMENT—JUNE 2013 ALTERNATIVE A

1. Information received since the Federal Open Market Committee met in March May suggests that economic activity has been expanding at a moderate pace. Labor market conditions have shown some improvement in recent months, on balance, but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has strengthened further, but manufacturing activity has slowed and fiscal policy is restraining economic growth. Inflation has been running somewhat below the Committee's longer-run objective, even apart from temporary variations that largely reflect fluctuations in energy prices. Longer-term inflation expectations have remained stable.

2. Consistent with In pursuing its statutory mandate, the Committee seeks takes a balanced approach to fostering maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace, and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate, The Committee also anticipates that and inflation over the medium-term likely will run at or below move up to its 2 percent objective, or [ even ] modestly higher for a time. Nonetheless, the Committee continues to see downside risks to the economic outlook.

3. To support a stronger economic recovery and to help ensure that inflation, over time, is at does not remain below the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. In addition, the Committee now intends to rely upon paydowns of principal rather than sales of agency mortgage-backed securities when it eventually becomes appropriate to reduce its holdings of those securities. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.



5. To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to ¼ percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6½ [ 6 | 5½ ] percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to eventually begins to remove reduce policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and price stability. In particular, the Committee expects that when the time comes to reduce policy accommodation, it will be appropriate to do so gradually in order to foster strong growth in employment and inflation of at 2 percent, or [ even ] modestly higher for a time.


FOMC STATEMENT—JUNE 2013 ALTERNATIVE B

1. Information received since the Federal Open Market Committee met in March May suggests that economic activity has been expanding at a moderate pace. Labor market conditions have shown some further improvement in recent months, on balance, but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy is restraining economic growth. [ Partly reflecting transitory influences, ] inflation has been running [ somewhat ] below the Committee's longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. but longer-term inflation expectations have remained stable.

2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee continues to sees the downside risks to the economic outlook for the economy and the labor market as having diminished since the fall. The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.

3. To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.


5. To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to ¼ percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6½ percent, inflation between one and


two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.


FOMC STATEMENT—JUNE 2013 ALTERNATIVE C 1. Information received since the Federal Open Market Committee met in March May

suggests indicates that economic activity has been expanding at a moderate pace. Labor market conditions have shown some improvement continued to improve in recent months, on balance, with ongoing gains in payroll employment, but although the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy is restraining economic growth. Inflation has been running somewhat below the Committee's longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. but longer-term inflation expectations have remained stable.

2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee continues to sees the downside risks to the economic outlook for the economy and the labor market as having diminished since the fall and is becoming more confident that labor market conditions will continue to improve over the medium term. The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.

3. To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee will continue adding to its holdings of longer-term securities. However, in light of the improvement in the outlook for the labor market since the Committee began its current asset purchase program last September, the Committee decided to continue purchasing purchase additional agency mortgage-backed securities at a pace of $40 [ $35 ] billion per month and longer-term Treasury securities at a pace of $45 [ $35 ] billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions The Committee’s sizable and still increasing holdings of longer-term securities should maintain continue to put downward pressure on longer-term interest rates, support mortgage markets, and help to make keep broader financial conditions more highly accommodative.



5. To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to ¼ percent and currently anticipates reaffirms that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6½ percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.


April-May Directive

Consistent with its statutory mandate, the Federal Open Market Committee seeks

monetary and financial conditions that will foster maximum employment and price

stability. In particular, the Committee seeks conditions in reserve markets consistent with

federal funds trading in a range from 0 to ¼ percent. The Committee directs the Desk to

undertake open market operations as necessary to maintain such conditions. The Desk is

directed to continue purchasing longer-term Treasury securities at a pace of about $45

billion per month and to continue purchasing agency mortgage-backed securities at a

pace of about $40 billion per month. The Committee also directs the Desk to engage in

dollar roll and coupon swap transactions as necessary to facilitate settlement of the

Federal Reserve’s agency mortgage-backed securities transactions. The Committee

directs the Desk to maintain its policy of rolling over maturing Treasury securities into

new issues and its policy of reinvesting principal payments on all agency debt and agency

mortgage-backed securities in agency mortgage-backed securities. The System Open

Market Account Manager and the Secretary will keep the Committee informed of

ongoing developments regarding the System’s balance sheet that could affect the

attainment over time of the Committee’s objectives of maximum employment and price

stability.


Directive for June 2013 Alternative A

















stability.


Directive for June 2013 Alternative B

















stability.


Directive for June 2013 Alternative C





undertake open market operations as necessary to maintain such conditions. Beginning

with the month of July, the Desk is directed to continue purchasing purchase longer-

term Treasury securities at a pace of about $45 $35 billion per month and to continue

purchasing purchase agency mortgage-backed securities at a pace of about $40 $35

billion per month. The Committee also directs the Desk to engage in dollar roll and

coupon swap transactions as necessary to facilitate settlement of the Federal Reserve’s

agency mortgage-backed securities transactions. The Committee directs the Desk to

maintain its policy of rolling over maturing Treasury securities into new issues and its

policy of reinvesting principal payments on all agency debt and agency mortgage-backed

securities in agency mortgage-backed securities. The System Open Market Account

Manager and the Secretary will keep the Committee informed of ongoing developments

regarding the System’s balance sheet that could affect the attainment over time of the

Committee’s objectives of maximum employment and price stability.


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