Accessible Material
December 2011 Tealbook B Tables and Charts†
Monetary Policy Strategies
Equilibrium Real Federal Funds Rate
Figure: Short-Run Estimates with Confidence Intervals
Line chart, 1991 to 2011. Unit is percent. There are five series, "The actual real funds rate based on lagged core inflation," "Range of four model-based estimates," "70 percent confidence interval," "90 percent confidence interval," and "Tealbook-consistent measure (FRB/US)." The actual real funds rate based on lagged core inflation begins at about 2 and generally decreases to about 0 in 1992:Q4. It generally increases to about 4 in 2000:Q4 then generally decreases to about -1 in 2004:2. It generally increases to about 3 in 2006:Q3 then generally decreases to about -2 in 2008:Q4. It generally increases to about -1 in 2011:Q1 then generally decreases ending at about -2. Range of four model-based estimates begins at about [-.5, 2] and generally increases to about [2, 5] in 1999:Q4. It generally decreases to about [0, 1] in 2003:Q1 then generally increases to about [.5, .75] in 2004:Q4. It generally decreases to about [-7, -2] in 2009:Q2 then generally increases ending at about [-4, 0]. 70 percent confidence interval begins at about [-1, 2.25] and generally increases to about [1, 5] in 2000:Q1. It generally decreases to about [-1.75, 1] in 2003:Q2 then generally increases to about [-1, 3] in 2006:Q3. It generally decreases to about [-7, -2] in 2009:Q2. It generally increases ending at about [-4, 0]. 90 percent confidence interval begins at about [-2, 3.5] and generally increases to about [-1, 6] in 2000:Q1. It generally decreases to about [-3, 2] in 2003:Q2 then generally increases to about [-2, 4] in 2006:Q2. It generally decreases to about [-8, 0.25] in 2009:Q2 then generally increases ending at about [-5, 2]. Tealbook-consistent measure (FRB/US) begins in 1997:Q3 at about 4, and roughly follows the actual real funds rate curve. It reaches about 5.5 by 2000:Q2, decreases to about 0 by 2002:Q4, increases to about 3 by 2007:Q2, and decreases to about -4 by 2009:Q1. It then fluctuates between about -4 and -1.5 for the remainder of the period, ending at about -3.5 in 2011:Q4.
Current Tealbook | Previous Tealbook | |
---|---|---|
Short-Run Measures | ||
Single-equation model | -1.8 | -2.2 |
Small structural model | -3.9 | -4.2 |
EDO model | 0.3 | -0.3 |
FRB/US model | -3.1 | -3.2 |
Confidence intervals for four model-based estimates | ||
70 percent confidence interval | -4.3 to 0.2 | |
90 percent confidence interval | -5.3 to 1.5 | |
Tealbook-consistent measures | ||
EDO model | -4.4 | -4.3 |
FRB/US model | -3.3 | -3.3 |
Medium-Run Measures | ||
Single-equation model | 0.9 | 0.9 |
Small structural model | 0.5 | 0.6 |
Confidence intervals for two model-based estimates | ||
70 percent confidence interval | -0.2 to 1.6 | |
90 percent confidence interval | -0.7 to 2.4 | |
TIPS-based factor model | 1.7 | 1.8 |
Memo | ||
Actual real federal funds rate | -1.5 | -1.5 |
Note: Explanatory Note A provides background information regarding the construction of these measures and confidence intervals. The actual real federal funds rate shown is generated using lagged core inflation as a proxy for inflation expectations. For information regarding alternative measures, see Explanatory Note A.
Constrained vs. Unconstrained Monetary Policy (2 Percent Inflation Goal)
Figure: Nominal Federal Funds Rate
Line chart, 2011 to 2020. Unit is percent. There are three series, "Current Tealbook: Constrained," "Previous Tealbook: Constrained," and "Current Tealbook: Unconstrained." Current Tealbook: Constrained begins at about 0 and remains about constant until 2016:Q1. It generally increases ending at about 5. Previous Tealbook: Constrained begins at about 0 and remains about constant until 2015:Q4. It generally increases ending at about 5. Current Tealbook: Unconstrained begins at about 0 and generally decreases to about -3 in 2013:Q1 then generally increases ending at about 4.5.
Figure: Real Federal Funds Rate
Line chart, 2011 to 2020. Unit is percent. There are three series, "Current Tealbook: Constrained," "Previous Tealbook: Constrained," and "Current Tealbook: Unconstrained." Current Tealbook: Constrained begins at about -1 and generally decreases to about -2 in 2013:Q1. It remains about constant until 2016:Q2 then generally increases ending at about 3. Previous Tealbook: Constrained begins at about -1 and generally decreases to about -2 in 2012:Q1. It remains about constant to in 2015:Q4. It generally increases ending at about 3. Current Tealbook: Unconstrained begins at about -1 and generally decreases to about -5 in 2013:Q2. It generally increases ending at about 2.5.
Figure: Civilian Unemployment Rate
Line chart, 2011 to 2020. Unit is percent. There are three series, "Current Tealbook: Constrained," "Previous Tealbook: Constrained," and "Current Tealbook: Unconstrained." Current Tealbook: Constrained begins at about 9 and generally decreases to about 5 in 2018:Q1. It generally increases ending at about 5.5. Previous Tealbook: Constrained begins at about 9 and generally decreases to about 5 in 2017:Q1. It generally increases ending at about 5.5. Current Tealbook: Unconstrained begins at about 9 and generally decreases to about 5.5 in 2015:Q2. It remains about constant to the end of the timeline.
Figure: PCE Inflation
Line chart, 2011 to 2020. Unit is percent. Data are four-quarter averages. There are three series, "Current Tealbook: Constrained," "Previous Tealbook: Constrained," and "Current Tealbook: Unconstrained." Current Tealbook: Constrained begins at about 1.75 and generally increases to about 2.9 in 2011:Q4. It generally decreases to about 1.6 in 2012:Q4 then generally increases to about 2.25 in 2018:Q2. It generally decreases ending at about 2.0. Previous Tealbook: Constrained begins at about 1.75 and generally increases to about 2.8 in 2011:Q4. It generally decreases to about 2.0 in 2012:Q4 then generally increases to about 2.25 in 2017:Q4. It generally decreases ending at about 2.0. Current Tealbook: Unconstrained begins at about 1.75 and generally increases to about 2.9 in 2011:Q4. It generally decreases to about 1.6 in 2012:Q3 then generally increases to about 2.25 in 2015:Q4 then generally decreases ending at about 1.9.
Policy Rules and Market-Based Expectations for the Federal Funds Rate
Figure: FRB/US Model Simulations of Estimated Outcome-Based Rule
Line chart, 2011:Q4 to 2016:Q4. Unit is percent. There are two series, "Current Tealbook" and "Previous Tealbook." Current Tealbook begins at about 0 and remains about constant until 2014:Q2. It generally increases ending at about 2.75. Previous Tealbook begins at about 0 and remains about constant until 2014:Q1. It generally increases ending at about 3. 70 percent confidence interval is presented as a dark shaded range. It begins at about 0 and generally increases ending at about [0.75, 4.75]. 90 percent interval is presented as a light shaded range. It begins at about 0 and generally increases ending at about [0, 6].
Note: The staff baseline projection for the federal funds rate is derived from the outcome-based policy rule. Explanatory Note B provides further background information.
Figure: Market-Based Expectations for the Federal Funds Rate
Line chart, 2011:Q4 to 2016:Q4. Unit is percent. There are two series, "Current Tealbook" and "Previous Tealbook." Current Tealbook begins at about 0 and remains about constant until 2012:Q4. It generally increases ending at about 2. Previous Tealbook begins at about 0 and remains about constant until 2012:Q3. It generally increases ending at about 2.25. Current Tealbook 70 percent confidence interval is presented as a dark shaded range that begins at about 0 and generally increases ending at about [.5, 3.5]. Current Tealbook 90 percent confidence interval is presented as a light shaded range that begins at about 0 and generally increases ending at about [0.25, 5.5]. The Previous Tealbook 70 and 90 percent confidence intervals follow paths similar to the Current Tealbook 70 and 90 percent confidence intervals, but end about 0.1-0.3 percent higher.
Note: The panel depicts the mean path and confidence intervals of future federal funds rates derived from market quotes as of December 7. Explanatory Note B provides further background information.
Near-Term Prescriptions of Simple Policy Rules
Constrained Policy | Unconstrained Policy | |||
---|---|---|---|---|
2012Q1 | 2012Q2 | 2012Q1 | 2012Q2 | |
Taylor (1993) rule | 0.90 | 0.59 | 0.90 | 0.59 |
Previous Tealbook | 0.86 | 0.62 | 0.86 | 0.62 |
Taylor (1999) rule | 0.13 | 0.13 | -1.82 | -2.15 |
Previous Tealbook | 0.13 | 0.13 | -2.09 | -2.28 |
Estimated outcome-based rule | 0.13 | 0.13 | -0.11 | -0.42 |
Previous Tealbook Outlook | 0.13 | 0.13 | -0.12 | -0.39 |
Estimated forecast-based rule | 0.13 | 0.13 | -0.27 | -0.61 |
Previous Tealbook Outlook | 0.13 | 0.13 | -0.24 | -0.60 |
First-difference rule | 0.13 | 0.13 | -0.02 | -0.14 |
Previous Tealbook Outlook | 0.13 | 0.13 | 0.03 | 0.01 |
2012Q1 | 2012Q2 | |
---|---|---|
Staff assumption | 0.08 | 0.10 |
Fed funds futures | 0.10 | 0.13 |
Median expectation of primary dealers | 0.13 | 0.13 |
Blue Chip forecast (December 1, 2011) | 0.10 | 0.10 |
Note: In calculating the near-term prescriptions of these simple policy rules, policymakers' long-run inflation objective is assumed to be 2 percent. Explanatory Note B provides further background information. For rules which have the lagged policy rate as a right-hand-side variable, the lines denoted "Previous Tealbook Outlook" report rule prescriptions based on the previous Tealbook's staff outlook, but jumping off from the average value for the policy rate thus far in the quarter.
[Box:] Policy Rule Prescriptions and the Lower Bound on Interest Rates
Figure: Outcome-based rule
Line chart, 2008 to 2016. Unit is percent. There are two series, "Unconstrained" and "Baseline." Unconstrained begins at about 3 and generally decreases to about -4 in 2009:Q3. It generally increases ending at about 3. Baseline begins at about 3 and generally decreases to about 0 in 2009:Q1. It remains about constant until 2014:Q3 then generally increases ending at about 3.
Figure: First-difference rule
Line chart, 2008 to 2016. Unit is percent. There are three series, "Unconstrained," "Constrained," and "Baseline." Unconstrained begins at about 3 and generally decreases to about -3 in 2009:Q3. It fluctuates but remains about constant until 2013:Q4. It generally increases ending at about 1. Constrained begins at about 3 and generally decreases to about 0 in 2009:Q2. It remains about constant until 2003:Q3. It generally increases ending at about 4.5. Baseline begins at about 3 and generally decreases to about 0 in 2009:Q2. It remains about constant until 2014:Q4 then generally increases ending at about 2.75.
Figure: Unconstrained Taylor rules
Line chart, 2008 to 2016. Unit is percent. There are three series, "Taylor 1993," "Taylor 1999," and "Baseline." Taylor 1993 begins at about 3 and generally decreases to about -1 in 2009:Q3. It fluctuates but generally increases ending at about 3. Taylor 1999 begins at about 3 and generally decreases to about -5 in 2009:Q3. It generally increases ending at about 2. Baseline begins at about 3 and generally decreases to about 0 in 2009:Q1. It remains about constant until 2014:Q4 then generally increases ending at about 2.75.
Cumulative Deviation* | Departure Date** | |
---|---|---|
Outcome based | 7.4 | 2014Q4 |
First difference | 8.9 | 2013Q3 |
Taylor 1993 | 0.6 | 2012Q1 |
Taylor 1999 | 10.3 | 2015Q2 |
* The sum of the deviations of the constrained from the unconstrained rules over 2009Q1-2011Q4 in percentage-point years. Return to table
** The date that the unadjusted, constrained rule rises above the effective lower bound. Return to table
† Note: Data values for figures are rounded and may not sum to totals. Return to text