Accessible Material
December 2011 Tealbook B Tables and Charts†
Monetary Policy Alternatives
Table 1: Overview of Policy Alternatives for the December 13 FOMC Statement
Selected Elements |
November Statement |
December Alternatives | ||
---|---|---|---|---|
A | B | C | ||
Balance Sheet | ||||
MEP | $400 billion; complete by end of June 2012 |
unchanged | cut to $200 billion; complete by end of March 2012 |
|
Additional Purchases |
none | $500 billion of agency MBS by end of December 2012 OR $40 billion of agency MBS per month; will adjust this program as needed to foster objectives |
none | |
Reinvestment Policies |
payments of agency debt and MBS into agency MBS; Treasuries into Treasuries |
unchanged | ||
Forward Rate Guidance | ||||
First Option | at least through mid-2013 |
at least through end of 2014 |
unchanged | at least through 2012 |
Second Option | none | at least through end of 2014 and projections of unemployment and inflation rates at end of 2014 |
none | |
Future Policy Action | ||||
Approach | assess economic outlook; |
monitor economic outlook and financial developments; | unchanged | |
prepared to employ its tools to promote recovery |
unchanged | prepared to employ its tools as appropriate to promote objectives |
[Note: In the December 2011 FOMC Statement Alternatives, emphasis (strike-through) indicates strike-through text in the original document, and strong emphasis (bold) indicates bold red underlined text in the original document.]
December FOMC Statement--Alternative A
- 1. Information received since the Federal Open Market Committee met in September November indicates suggests that economic growth strengthened somewhat in the third quarter, reflecting in part a reversal of the temporary factors that had weighed on growth earlier in the year the economy has been expanding modestly, while global growth appears to be slowing. Nonetheless Although recent indicators point to continuing weakness some improvement in overall labor market conditions, and the unemployment rate remains elevated. Household spending has increased at a somewhat faster pace in recent months. continued to advance, but business fixed investment in equipment and software has continued to expand appears to be increasing less rapidly but investment in nonresidential structures is still weak, and the housing sector remains depressed. Inflation appears to have has moderated since earlier in the year, as prices of energy and some commodities have declined from their peaks. and 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 continues to expects that, absent further policy action, a moderate the pace of economic growth would remain modest over coming quarters and consequently anticipates that the unemployment rate will would decline only very gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets. the Committee also anticipates that inflation will would settle, over coming quarters, at levels at or below those consistent with the Committee's dual mandate as the effects of past energy and other commodity price increases dissipate further. Strains in global financial markets continue to pose significant downside risks to the economic outlook, and the risks to the outlook for inflation also appear to be tilted to the downside. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.
- 3. To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to purchase a further $500 billion of agency mortgage-backed securities by the end of December 2012. In addition, the Committee intends to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is also maintaining its existing policies 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. These programs should put downward pressure on longer-term interest rates, provide support to mortgage markets, and help make broader financial conditions more accommodative. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.
OR - 3′. To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to undertake a program of purchases of agency mortgage-backed securities. The Committee has initially authorized purchases of agency mortgage-backed securities of $40 billion per month, and will adjust this program as needed to foster its objectives of maximum employment and stable prices. In addition, the Committee will continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is also maintaining its existing policies 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. These programs should put downward pressure on longer-term interest rates, provide support to mortgage markets, and help make broader financial conditions more accommodative. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.
- 4. The Committee also decided to keep the target range for the federal funds rate at 0 to ¼ percent. and currently The Committee now anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant this exceptionally low levels range for the federal funds rate at least through mid-2013 the end of 2014. Specifically, given its anticipated path for monetary policy, the Committee currently projects that the unemployment rate will be roughly [ 7 ] percent and the inflation rate (as measured by the price index for personal consumption expenditures) will be around [ 2 ] percent at the end of 2014.
- 5. The Committee will continue to assess monitor the economic outlook in light of incoming information and financial developments and is prepared to employ its tools to promote a stronger economic recovery in a context of price stability.
December FOMC Statement--Alternative B
- 1. Information received since the Federal Open Market Committee met in September November indicates suggests that economic growth strengthened somewhat in the third quarter, reflecting in part a reversal of the temporary factors that had weighed on growth earlier in the year the economy has been expanding moderately, notwithstanding some apparent slowing in global growth. Nonetheless While recent indicators point to continuing weakness some improvement in overall labor market conditions, and the unemployment rate remains elevated. Household spending has increased at a somewhat faster pace in recent months. continued to advance, but business fixed investment in equipment and software has continued to expand appears to be increasing less rapidly but investment in nonresidential structures is still weak, and the housing sector remains depressed. Inflation appears to have has moderated since earlier in the year, as prices of energy and some commodities have declined from their peaks. and 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 continues to expect a moderate pace of economic growth over coming quarters and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, there are Strains in global financial markets continue to pose significant downside risks to the economic outlook, including strains in global financial markets. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee's dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.
- 3. To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies 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. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.
- 4. The Committee also decided to keep the target range for the federal funds rate at 0 to ¼ percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.
- 5. The Committee will continue to assess monitor the economic outlook in light of incoming information and financial developments and is prepared to employ its tools to promote a stronger economic recovery in a context of price stability.
December FOMC Statement--Alternative C
- 1. Information received since the Federal Open Market Committee met in September November indicates suggests that the pace of economic growth activity has strengthened somewhat in the third quarter, reflecting in part a reversal of the temporary factors that had weighed on growth earlier in the year. Nonetheless, recent indicators point to continuing weakness in overall labor market conditions, and Although the unemployment rate remains elevated, it has declined of late, and employment has continued to increase. Household spending has increased at a somewhat faster pace in recent months advanced further, and business fixed investment in equipment and software has continued to expand, but investment in nonresidential structures is still weak, and the housing sector remains depressed. Inflation appears to have has moderated only somewhat since earlier in the year, despite a decline in the as prices of energy and some commodities have declined from their peaks. 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 continues to expects a moderate pace some strengthening of economic growth over coming quarters and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee's dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.
- 3. To support a stronger the economic recovery and to while helping to ensure that inflation, over time, is at does not exceed levels that are consistent with the dual mandate, the Committee decided today to continue its reduce by half the size of the program to extend the average maturity of its holdings of securities as that it announced in September. In particular, the Committee intends to limit purchases and sales of securities under this program to $200 billion each and to complete these operations by the end of March 2012. The Committee is maintaining its existing policies 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. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.
- 4. The Committee also decided to keep the target range for the federal funds rate at 0 to ¼ percent and currently now anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013 2012.
- 5. The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate to promote a stronger economic recovery in a context of price stability its objectives of maximum employment and stable prices.
Long-Run Projections of the Balance Sheet and Monetary Base
Figure: Total Assets
Line chart, 2006 to 2020. Unit is billions of dollars. Data are monthly. There are four series, "Alt A," "Alt B," "Alt C," and "October Alt B." The series begin at about 750 and remain about constant until late 2008. They generally increase together to about 2250 in early 2009 then generally decrease together to about 1800 in early 2009. They generally increase together to about 3000 in mid-2011. Alt A generally increases to about 3400 in early 2013. It generally decreases to about 1750 in early 2018 then generally increases ending at about 2000. Alt B remains about constant until mid-2014 then generally decreases to about 1500 in mid-2017. It generally increases ending in about 2000. Alt C generally decreases to about 1500 in early 2016 then generally increases ending at about 2000. October Alt B remains about constant until early 2014 then generally decreases to about 1500 in mid-2017. It generally increases ending at about 2000.
Growth Rates for the Monetary Base
Date | Alternative B | Alternative A | Alternative C | Memo: October Tealbook |
---|---|---|---|---|
Percent, annual rate | ||||
Monthly | ||||
Jan-11 | 23.3 | 23.3 | 23.3 | 23.3 |
Feb-11 | 57.6 | 57.6 | 57.6 | 57.6 |
Mar-11 | 97.8 | 97.8 | 97.8 | 97.8 |
Apr-11 | 74.4 | 74.4 | 74.4 | 74.4 |
May-11 | 42.1 | 42.1 | 42.1 | 42.1 |
Jun-11 | 35.9 | 35.9 | 35.9 | 35.9 |
Jul-11 | 27.0 | 27.0 | 27.0 | 27.0 |
Aug-11 | 2.0 | 2.0 | 2.0 | 2.0 |
Sep-11 | -10.6 | -10.6 | -10.6 | -10.5 |
Oct-11 | -4.5 | -4.5 | -4.5 | 1.5 |
Nov-11 | -8.0 | -8.0 | -8.0 | 10.6 |
Dec-11 | 12.1 | 11.9 | 11.5 | 0.8 |
Jan-12 | 15.1 | 16.5 | 14.0 | -8.8 |
Feb-12 | 10.3 | 18.8 | 9.2 | 9.8 |
Mar-12 | 4.4 | 19.8 | 3.4 | 16.6 |
Apr-12 | -29.5 | -12.1 | -31.2 | 3.5 |
May-12 | 0.9 | 18.0 | -1.4 | 3.3 |
Jun-12 | 15.4 | 31.6 | 13.2 | 3.2 |
Quarterly | ||||
2011 Q1 | 36.8 | 36.8 | 36.8 | 36.8 |
2011 Q2 | 69.3 | 69.3 | 69.3 | 69.4 |
2011 Q3 | 21.0 | 21.0 | 21.0 | 21.1 |
2011 Q4 | -4.1 | -4.1 | -4.1 | 0.8 |
2012 Q1 | 9.7 | 13.8 | 8.8 | 2.4 |
2012 Q2 | -5.9 | 10.0 | -7.6 | 7.1 |
2012 Q3 | 4.7 | 21.2 | -2.2 | 2.0 |
2012 Q4 | 5.4 | 20.7 | -4.9 | 0.8 |
Annual - Q4 to Q4 | ||||
2010 | 0.9 | 0.9 | 0.9 | 0.9 |
2011 | 33.5 | 33.5 | 33.5 | 35.2 |
2012 | 3.5 | 17.4 | -1.5 | 3.1 |
2013 | 0.5 | 4.7 | -10.8 | -0.8 |
2014 | -4.8 | -4.5 | -14.6 | -6.1 |
2015 | -11.3 | -11.9 | -15.8 | -12.2 |
2016 | -19.6 | -20.1 | -11.7 | -19.9 |
Note: Not seasonally adjusted.
Growth Rates for M2
Tealbook Forecast * | ||
---|---|---|
Monthly Growth Rates | ||
Apr-11 | 4.3 | |
May-11 | 6.9 | |
Jun-11 | 11.6 | |
Jul-11 | 26.6 | |
Aug-11 | 30.0 | |
Sep-11 | 6.0 | |
Oct-11 | 3.7 | |
Nov-11 | 4.8 | |
Dec-11 | 5.0 | |
Jan-12 | 3.3 | |
Feb-12 | 3.3 | |
Mar-12 | 3.3 | |
Quarterly Growth Rates | ||
2011 Q2 | 6.0 | |
2011 Q3 | 19.9 | |
2011 Q4 | 7.5 | |
2012 Q1 | 3.8 | |
Annual Growth Rates | ||
2010 | 3.2 | |
2011 | 9.9 | |
2012 | 3.9 | |
2013 | 3.1 |
* This forecast is consistent with nominal GDP and interest rates in the Tealbook forecast. Actual data through November 2011; projections thereafter. Return to table
[Note: In the December 2011 FOMC Directive Alternatives, emphasis (strike-through) indicates strike-through text in the original document, and strong emphasis (bold) indicates bold red underlined text in the original document.]
December 2011 FOMC Directive -- Alternative A
The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, 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 continue the maturity extension program it began in September to purchase, by the end of June 2012, Treasury securities with remaining maturities of approximately 6 years to 30 years with a total face value of $400 billion, and to sell Treasury securities with remaining maturities of 3 years or less with a total face value of $400 billion. [ The Committee also directs the Desk to execute purchases of agency mortgage-backed securities in order to increase the total face value of domestic securities held in the System Open Market Account to approximately $3.1 trillion by the end of December 2012. | The Committee also directs the Desk to execute purchases of agency mortgage-backed securities in order to increase the total face value of domestic securities held in the System Open Market Account by approximately $40 billion per month. ] The Committee also directs the Desk to maintain its existing policies of rolling over maturing Treasury securities into new issues and of reinvesting principal payments on all agency debt and agency mortgage-backed securities in the System Open Market Account in agency mortgage-backed securities in order to maintain the total face value of domestic securities at approximately $2.6 trillion. The Committee directs the Desk to engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions. 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.
December 2011 FOMC Directive -- Alternative B
The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, 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 continue the maturity extension program it began in September to purchase, by the end of June 2012, Treasury securities with remaining maturities of approximately 6 years to 30 years with a total face value of $400 billion, and to sell Treasury securities with remaining maturities of 3 years or less with a total face value of $400 billion. The Committee also directs the Desk to maintain its existing policies of rolling over maturing Treasury securities into new issues and of reinvesting principal payments on all agency debt and agency mortgage-backed securities in the System Open Market Account in agency mortgage-backed securities in order to maintain the total face value of domestic securities at approximately $2.6 trillion. The Committee directs the Desk to engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions. 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.
December 2011 FOMC Directive -- Alternative C
The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, 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 continue modify the maturity extension program it began in September so as to purchase, by the end of June March 2012, Treasury securities with remaining maturities of approximately 6 years to 30 years with a total face value of $400 $200 billion, and to sell Treasury securities with remaining maturities of 3 years or less with a total face value of $400 $200 billion. The Committee also directs the Desk to maintain its existing policies of rolling over maturing Treasury securities into new issues and of reinvesting principal payments on all agency debt and agency mortgage-backed securities in the System Open Market Account in agency mortgage-backed securities in order to maintain the total face value of domestic securities at approximately $2.6 trillion. The Committee directs the Desk to engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions. 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.
† Note: Data values for figures are rounded and may not sum to totals. Return to text