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U.S. Economic Outlook

West Virginia University Economic Outlook ConferenceNovember 8, 2017

R. Andrew BauerSenior Regional Economist

2

Real Gross Domestic Product

Source: Bureau of Economic Analysis via Haver Analytics

2017 Q3 Q4 Q1 Q2 Q3

CHANGE FROM PREVIOUS QUARTER AT COMPOUND ANNUAL RATE [Percent]:

Gross Domestic Product 2.8 1.8 1.2 3.1 3.0

Personal Consumption Expenditures 2.8 2.9 1.9 3.3 2.4

Nonresidential Fixed Investment 3.4 0.2 7.2 6.7 3.9Structures 14.3 -2.2 14.8 7.0 -5.2Equipment -2.1 1.8 4.4 8.8 8.6Intellectual Property 4.2 -0.4 5.7 3.7 4.3

Residential Fixed Investment -4.5 7.1 11.1 -7.3 -6.0

Exports of Goods & Services 6.4 -3.8 7.3 3.5 2.3Imports of Goods & Services 2.7 8.1 4.3 1.5 -0.8

Final Sales to Domestic Purchasers 2.2 2.3 2.4 2.7 1.8

LEVEL IN QUARTER AT SEASONALLY ADJUSTED ANNUAL RATE [Billions of Chained (2005) Dollars]:

Change in Private Inventories 17.6 63.1 1.2 5.5 35.8

Net Exports of Goods & Services -557.3 -631.1 -622.2 -613.6 -595.5

2016

-0.1Government Consumption Expenditures & Gross Investment

0.5 0.2 -0.6 -0.2

-9

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

-9

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Percent change from previous quarter at annual rate

Note: Projection is the median, central tendency, and range from the September 2017 Summary of Economic Projections. Red dots indicate median projections. Projections of change in real gross domestic product (GDP) are from the fourth quarter of the previous year to the fourth quarter of the year indicated. 3

Q33.0%

Real Gross Domestic Product

Source: Bureau of Economic Analysis via Haver Analytics & Federal Reserve Board

FOMC Projection

4

Decomposition of Real GDP

Source: Bureau of Economic Analysis and Bureau of Labor Statistics via Haver Analytics

Note: Productivity is calculated as real GDP per employee, from the Household Survey.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014

Employment

Productivity

GDP

10-Year Annual Growth Rates

-14

-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

14

16

-14

-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

14

16

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

12 Month % Change

3 Month Annualized % Change

September4.4%

5

Retail Sales

Source: Census Bureau via Haver Analytics

Note: Retail sales includes food services.

Jul. Aug. Sep.Total 0.5 -0.1 1.6x Gasoline 0.6 -0.4 1.2

Month over Month % Change

-8

-6

-4

-2

0

2

4

6

8

-8

-6

-4

-2

0

2

4

6

8

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

12 Month % Change

Real Disposable Personal Income

Real Personal Consumption Expenditure

September

6

Consumer Spending and Income


July August SeptemberIncome 0.1 -0.1 0.0

Expenditures 0.3 -0.1 0.6

Month over Month % Change

Note: Income has been adjusted to account for temporary fiscal actions in 2008 and 2012-2013.

7

Sales of Automobiles & Light Trucks

Source: Autodata Corporation via Haver Analytics

4

6

8

10

12

14

16

18

20

4

6

8

10

12

14

16

18

20

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Millions of Vehicles

Autos and Light Trucks

September18.5 mil.

Light Trucks

Autos

8

Personal Saving Rate


0

1

2

3

4

5

6

7

8

9

10

0

1

2

3

4

5

6

7

8

9

10

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Percent of disposable personal income

September3.1%

Note: Income has been adjusted to account for temporary events

9

Household Net Worth

Source: Z.1 Financial Accounts of the United States via Haver Analytics

450

500

550

600

650

700

450

500

550

600

650

700

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Percent of disposable personal income

Q2

2.5

3

3.5

4

4.5

5

5.5

6

6.5

2.5

3

3.5

4

4.5

5

5.5

6

6.5

200020012002200320042005200620072008200920102011201220132014201520162017

10

Existing Single-Family Home Sales

Source: National Association of Realtors via Haver Analytics

September

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

11

New Single-Family Home Sales


September

12

Private Single-Family Housing Starts & Permits


0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2000 2002 2004 2006 2008 2010 2012 2014 2016

1990 - 1999 Average Housing Starts

Permits

Starts September

Millions of Starts & Permits, Annual Rate

13

Private Multi-Family Housing Starts & Permits


0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

1990 – 1999 Average Multi-Family Starts

Starts

Permits

September

3-Month Moving Average, Millions of Starts & Permits, Annual Rate

-35

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

35

-35

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

35

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


14

Q3 -5.2%

Real Investment in Nonresidential Structures


15

Real Private Construction Put In Place


Notes: Private nonresidential construction deflated using the price index for private fixed investment in nonresidential structures and private residential construction deflated using the private residential investment chain price index.

220

270

320

370

420

470

520

570

620

670

220

270

320

370

420

470

520

570

620

670

2000 2002 2004 2006 2008 2010 2012 2014 2016

Real Private Residential Construction

Real Private Nonresidential Construction August

2009$, Billions

-30

-25

-20

-15

-10

-5

0

5

10

15

20

-30

-25

-20

-15

-10

-5

0

5

10

15

20

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


16

Q33.9%

Real Nonresidential Fixed Investment


-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

35

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

35

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


17

Q38.6%

Real Investment in Equipment


-8

-6

-4

-2

0

2

4

6

8

10

12

-8

-6

-4

-2

0

2

4

6

8

10

12

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


18

Q34.3%

Real Investment in Intellectual Property


19

Balance of International Trade


Note: Customs Value of Trade Balance

-80

-70

-60

-50

-40

-30

-20

-10

0

-80

-70

-60

-50

-40

-30

-20

-10

0

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Current $, Billions

PetroleumBalance

Trade Balance

Non- PetroleumBalance

August-42 Bil.

75

85

95

105

115

125

135

75

85

95

105

115

125

135

1980 1984 1988 1992 1996 2000 2004 2008 2012 2016

20

Exchange Value of the USDIndex, March 1973 = 100

Source: Board of Governors via Haver Analytics

Notes: Measured as the real broad trade-weighted exchange value of the United States Dollar.

September

21

Industrial Production


75

80

85

90

95

100

105

110

115

120

125

130

135

140

75

80

85

90

95

100

105

110

115

120

125

130

135

140

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Mining

Overall

Manufacturing

September

2012 = 100

22

Capacity Utilization Rate: Manufacturing


62

64

66

68

70

72

74

76

78

80

82

62

64

66

68

70

72

74

76

78

80

82

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Percent

September75.1%

23

Indexes of Manufacturing Activity

Source: Institute for Supply Management & Richmond Fed via Haver Analytics

-40

-30

-20

-10

0

10

20

30

40

35

40

45

50

55

60

65

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Diffusion Index, percent

ISM (Left Axis)

Richmond Fed Manufacturing Survey: Current

Conditions Composite Index (Right Axis)

September60.8

24

Indexes of Non-Manufacturing Activity

Source: Institute for Supply Management & Richmond Fed via Haver Analytics

-40

-30

-20

-10

0

10

20

30

40

35

40

45

50

55

60

65

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Diffusion Index, percent

ISM (Left Axis)

Richmond Fed Service Sector

Index: Revenues (Right Axis)

September59.8

Aug. Sep. Aug. Sep.

Purchasing Managers Index 58.8 60.8 Non-Manufacturing Index 55.3 59.8

Production 61.0 62.2 Business Activity 57.5 61.3

New Orders 60.3 64.6 New Orders 57.1 63.0

Employment 59.9 60.3 Employment 56.2 56.8

Supplier Deliveries 57.1 64.4 Supplier Deliveries 50.5 58.0

Inventories 55.5 52.5 Inventories 53.5 51.5

Prices 62.0 71.5 Prices 57.9 66.3

Backlog of Orders 57.5 58.0 Backlog of Orders 53.5 56.0

New Export Orders 55.5 57.0 New Export Orders 55.0 56.0

Imports 54.5 54.0 Imports 50.5 52.0

MANUFACTURING BUSINESS: NON-MANUFACTURING BUSINESS:

25DIFFUSION INDEXES: Numbers above 50 percent indicate more favorable responses towards economic activity.

ISM: Business Survey Indexes

Source: Institute for Supply Management via Haver Analytics

300

350

400

450

500

550

600

300

350

400

450

500

550

600

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

26

Manufacturers’ New Orders


August

New Orders

Shipments

27

Core Capital Goods

Notes: Core capital goods are nondefense capital goods excluding aircraft.


45

50

55

60

65

70

75

45

50

55

60

65

70

75

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

August

28

Business Inventory/Sales Ratio


1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.1

1.2

1.3

1.4

1.5

1.6

1.7

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Percent

Total Business

Retailers

Manufacturers

August

29

Nonfarm Payroll Employment

Source: Bureau of Labor Statistics via Haver Analytics

120

125

130

135

140

145

150

120

125

130

135

140

145

150

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Millions of Persons

October147.01 mil.

30

Nonfarm Payroll Employment


-800

-700

-600

-500

-400

-300

-200

-100

0

100

200

300

400

-800

-700

-600

-500

-400

-300

-200

-100

0

100

200

300

400

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Quarterly average of monthly changes, thousands of persons

Q4

Sep -33Aug 169Jul 138Jun 210May 145

Monthly Change

31

Unemployment Rate

Source: Bureau of Labor Statistics & Board of Governors via Haver Analytics

Notes: FOMC projection is the median, range, and central tendency for the Q4 levels, from the September 2017 meeting. Red dots indicate median projections

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Percent

October4.1% FOMC Projection

32

Measures of Labor Utilization


3

6

9

12

15

18

3

6

9

12

15

18

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Percent

U3: Official Unemployment Rate

U6: U5 + Involuntary Part-Time

U5: U3 + Discouraged + Marginally Attached October

6

7

8

9

10

11

12

13

14

6

7

8

9

10

11

12

13

14

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Non-Employment Index Including People Working Part-Time for Economic Reasons

Non-Employment Index

Percent

33

Non-Employment Index

Based on “Measuring Resource Utilization in the Labor Market,” Andreas Hornstein, Marianna Kudlyak, and Fabian Lange, Federal Reserve Bank of Richmond Economic Quarterly, First Quarter 2014.

September

34

Labor Market Flows

Source: JOLTS via Haver Analytics

Note: *Percent of total employment. **Percent of total employment plus job openings.

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2000 2002 2004 2006 2008 2010 2012 2014 2016

Percent

Hires Rate*

Job Openings Rate**

Quits Rate*

August

35

Labor Force Participation


57

58

59

60

61

62

63

64

65

66

67

68

57

58

59

60

61

62

63

64

65

66

67

68

1948 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016

October

Percent of Population

36

Aggregate Weekly Hours Index


90

92

94

96

98

100

102

104

106

108

90

92

94

96

98

100

102

104

106

108

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

OctoberIndex, 2007=100

37

Average Hourly Earnings


1.0

1.5

2.0

2.5

3.0

3.5

4.0

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

October2.6%

12 Month % Change of 3-Month Moving Average

Oct 0.0%Sep 0.5%Aug 0.1%Jul 0.5%Jun 0.2%

Monthly % Change

Employment Cost Index

38Source: Bureau of Labor Statistics via Haver Analytics

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year over Year % Change

Benefits Cost

Wages and Salaries

Total Compensation

Q3

-1

0

1

2

3

4

5

6

-1

0

1

2

3

4

5

6

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


Post-War Average(Labor Productivity)

39

Quarterly Change at Annual Rate

Labor Productivity, Nonfarm Business


Q2 17 1.5%Q1 17 0.1%Q4 16 1.3%Q3 16 2.5%

Q21.3%

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


Alternate Series

Q21.2%

40

Quarterly Change at Annual Rate

Unit Labor Cost, Nonfarm Business

Notes: Alternate series is derived from the Employment Cost Index.


Q2 17 0.2%Q1 17 4.8%Q4 16 -5.7%Q3 16 0.1%

Expenditure Price Indexes [Percent Change from Previous Month at Annual Rate]:

Aug. Sep. YoY %Personal Consumption Expenditures 2.5 4.6 1.6

Core (excludes Food and Energy) 1.2 1.6 1.3

Consumer Price Indexes [Percent Change from Previous Month at Annual Rate]:

Aug. Sep. YoY %All Items 4.9 6.8 2.2

Core (excludes Food and Energy) 3.0 1.5 1.7

Producer Price Indexes [Percent Change from Previous Month at Annual Rate]:

Aug. Sep. YoY %Finished Goods 5.6 9.5 3.2

Core (excludes Food and Energy) 1.2 1.8 1.7Core Intermediate Goods 4.5 1.9 3.1

Crude Goods -7.9 -4.4 7.0

Spot Commodity Price Index Aug. Sep. YoY %

CRB Spot Commodity Price Index -1.4 -1.9 6.2

[Percent Change from Previous Month]:

41

Gauges of Inflation

Source: BEA, BLS, & Commodity Research Bureau via Haver Analytics

Notes: Core PCE Price Index includes expenditures on food services.

42

Personal Consumption Expenditure Price Index

Source: Bureau of Economic Analysis & Board of Governors via Haver Analytics

Notes: FOMC projection is the median, range, and central tendency for Q4/Q4 percent changes, from the September 2017 meeting. Red dots indicate median projections.

-2

-1

0

1

2

3

4

5

-2

-1

0

1

2

3

4

5

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

12 Month % Change

2% Longer-run Target

FOMC ProjectionSeptember

1.6%

43

Core Personal Consumption Expenditure Price Index


Notes: FOMC projection is the median, range, and central tendency for Q4/Q4 percent changes, from the September 2017 meeting. Red dots indicate median projections. Core PCE Price Index excludes expenditures on gasoline and food services.

-2

-1

0

1

2

3

4

5

-2

-1

0

1

2

3

4

5

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

12 Month % Change

12 month percentage change

FOMC Projection

September1.3%

-3

-2

-1

0

1

2

3

4

5

6

-3

-2

-1

0

1

2

3

4

5

6

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Core CPI

All Items

12 Month % Change

September

44

Consumer Price Indexes


August SeptemberCPI: All Items 0.4% 0.5%Core CPI 0.2% 0.1%

45

Producer Price Indexes


-8

-6

-4

-2

0

2

4

6

8

10

12

-8

-6

-4

-2

0

2

4

6

8

10

12

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

All Finished Goods

Core Finished Goods September

12 Month % Change

All Finished Goods 3.2%Core Finished Goods 1.7%

September (percent)

46

Commodity Price Indexes

Source: Bureau of Labor Statistics & Commodity Research Bureau via Haver Analytics

-35

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

35

40

45

-21-18-15-12-9-6-30369

12151821242730

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Commodity Research Bureau Spot Commodity

Price Index(Right Axis)

PPI Core Intermediate

Processed Materials(Left Axis)

September

12 Month % Change 12 Month % Change

Price Indexes August SeptemberPPI Core Intermed. Goods 3.1% ---CRBS Spot Commodities 8.2% 6.2%

0

20

40

60

80

100

120

140

160

0

20

40

60

80

100

120

140

160

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Futures Price

Current US$/Barrel

Spot Price30-Oct-17

47

Crude Oil Prices

Source: Financial Times & New York Mercantile Exchange via Haver Analytics & Bloomberg

Notes: Spot and Futures Prices are for Brent Crude Oil.

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2009 2010 2011 2012 2013 2014 2015 2016 2017

5-Year5 Years Ahead

5-Year

Percent

48

October 20th

TIPS Inflation Compensation

Source: Federal Reserve Board /Haver Analytics

49

Federal Reserve System Assets


Note: Numbers may not add up due to rounding.

Treasury Securities:$1,652

Treasury Securities:$2,466

Agency MBS: $844

Agency MBS: $1,775

Agency Debt:$87

Agency Debt:$7

Miscellaneous: $282

Miscellaneous: $266

Total: $2,865

Total: $4,514

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

9/12/2012 10/25/2017

$, Billions

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Federal Funds Target Rate

Primary Credit Rate

Federal Funds Rate Target Range

Interest Rate Paid on Reserves

Percent

50

October 27th

Monetary Policy Instruments


-3

-2

-1

0

1

2

3

4

-3

-2

-1

0

1

2

3

4

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Percent

51

September

Real Federal Funds Rate


Note: The Real Federal Funds Rate is the difference between the effect Fed Funds rate and the lagged year-over-yearchange in the core PCE price index.

52

FOMC Statement

Information received since the Federal Open Market Committee met in July indicates that the labor market has continued to strengthen and that economic activity has been rising moderately so far this year. Job gains have remained solid in recent months, and the unemployment rate has stayed low. Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters. On a 12-month basis, overall inflation and the measure excluding food and energy prices have declined this year and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Hurricanes Harvey, Irma, and Maria have devastated many communities, inflicting severe hardship. Storm-related disruptions and rebuilding will affect economic activity in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term. Consequently, the Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further. Higher prices for gasoline and some other items in the aftermath of the hurricanes will likely boost inflation temporarily; apart from that effect, inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee's 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.

Source: Board of Governors

September 20, 2017

53

Continued…In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

In October, the Committee will initiate the balance sheet normalization program described in the June 2017 Addendum to the Committee's Policy Normalization Principles and Plans.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Patrick Harker; Robert S. Kaplan; Neel Kashkari; and Jerome H. Powell.

Source: Board of Governors September 20th, 2017

September 20, 2017

October 30, 2017

0

0.5

1

1.5

2

2.5

3

3.5

4

0

0.5

1

1.5

2

2.5

3

3.5

4

2017 2018 2019 2020 2021 2022 2023 2024

Percent

54

Eurodollar Futures

Source: CME Group via Bloomberg

55

Summary of Economic Projections: Federal Funds Rate

Source: Board of Governors

Note: Each dot in the chart represents the value of an FOMC participant’s judgment of the midpoint of the appropriate target range (or the appropriate target level) for the federal funds rate at the end of the calendar year. Projections made for the September 2017 meeting.

0

1

2

3

4

5

0

1

2

3

4

5

2017 2018 2019 Longer run

Percent

2020

0

500

1000

1500

2000

2500

3000

3500

4000

4500

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2009 2010 2011 2012 2013 2014 2015 2016 2017

Current $, Billions

56

October 25th

Monetary Base


0

1

2

3

4

5

6

7

8

9

10

11

0

1

2

3

4

5

6

7

8

9

10

11

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

12 Month % Change

57

M2


September

-0.25

0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

-0.25

0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2009 2010 2011 2012 2013 2014 2015 2016 2017

IOER

Federal Funds Rate

Primary Credit Rate

3-Month LIBOR

3-Month T-Bill Fed Reverse Repo Rateon Treasuries

Percent

58

October 27th

Money Market Rates

Source: Board of Governors & Financial Times via Haver Analytics & Bloomberg

0

1

2

3

4

5

6

7

8

9

10

0

1

2

3

4

5

6

7

8

9

10

2009 2010 2011 2012 2013 2014 2015 2016 2017

Corporate BBBBond Rate

Corporate AAABond Rate

30-YearConventional

Mortgage Rate

10-Year TreasuryBond Rate

Percent

59

October 27th

Capital Market Rates

Source: BofA Merrill Lynch & Board of Governors via Haver Analytics

60

Treasury Yield Curve


0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2.75

0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2.75

6 M 2 Yrs 3 Yrs 5 Yrs 7 Yrs 10 Yrs

September 18, 2017 October 30, 2017

Percent

Time to Maturity

0

1

2

3

4

5

6

7

8

0

1

2

3

4

5

6

7

8

2009 2010 2011 2012 2013 2014 2015 2016 2017

10 Year Rolling Average Risk Premium

Percent

61

Risk Premium

Source: BofA Merrill Lynch & Board of Governors via Haver Analytics

October 27th

Note: Risk Premium is defined as the difference in yields between BofA Merrill Lynch BBB and 10-year Treasury.

The views expressed here are those of the author, and do not necessarily represent those of the Federal Reserve Bank of Richmond or the Federal Reserve System.

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