omair ali antonio alfonso shehab chowdhury mohammad zubair ahsan syed federal reserve open market...

Omair AliAntonio Alfonso

Shehab ChowdhuryMohammad Zubair

Ahsan Syed

Federal Reserve Open Market CommitteeFed Challenge 2011

AGENDA

I. General Comments

II. GDP growth trends

III. Consumer Sector

IV. Housing Market

V. Labor Markets and Productivity

VI. Inflation

VII. Financial Markets

VIII. Specific Issues of Concern: Eurozone Worries

IX. Policy Action

I. General Comments: U.S. Economic Climate

p GDP growth has improvedp Labor market is weak with the unemployment rate

stuck at 9.1%p Consumers remain cautious – Consumer confidence

still low.p Business investment picking up.p Oil Prices are volatile.p Financial market worries dominate.p Policy actions – focus on reducing unemployment

II. GDP Growthp 3Q 2011 marks ninth consecutive quarter increase in real

GDP.p 3Q 2011 real GDP growth stepped up to a 2.5% rate from

1.3% in 2Q and 0.4% in 1Q. p Growth is up 1.6% compared to a year ago.p Strength seen in consumer spending (up 2.4%) and fixed

nonresidential investment (up 14%).p Final sales grew at a healthy 3.6% rate, but inventories

subtracted 1.1% from this to give us 2.5% 3Q growth.p Core PCE deflator was up at a 2.4% rate in 3Q, which is high,

but better than the 3.3% rate seen in 2Q.p Despite 3Q improvement, the GDP gap – the difference

between actual and potential GDP is sizeable at 6.7%

Large GDP Gap

-10

-8

-6

-4

-2

0

2

4

6

7000

8000

9000

10000

11000

12000

13000

14000

15000

90 92 94 96 98 00 02 04 06 08 10

GDP_GAP (% left axis)REAL_GDP (2005 $ bill, right axis)REAL_GDP_POTENTIAL (2005 $ BILL, RIGHT AXIS)

% Real $ BillGDP GAP, Actual Vs. Potential GDP

p Overall Assessment: Despite firmer 3Q growth, downside risks

remain.

III. Consumer Outlook

p 3Q 2011 revival in consumer spending but negative signs

dominate.p Consumer confidence slipped in October. p Income growth is meager

IV. Housing

p Some stabilization seenp Consumer confidence slipped in October. p Income growth is meager

Mortgage rates

Housing starts

Home Sales and the NAHB Housing Market Index

Foreclosure activity and Delinquency

Case Shiller Home Price Indexes

Case-Shiller continued

Retail Sales

V. Labor Markets and Productivity

p Unemployment rate is stuck at 9.1%p Consumer confidence slipped in October. p Income growth is meager

Unemployment

Under Utilized labor

Pay Roll

Job less

ISm

Industrial Production

Inventory Sales

Durable goods

Non Defense Captial goods

Trade Balance

U.S Dollar Index

Federal Deficit In terms of GDP

Out Put Per Hour

PPI

Capacity

Federal Funds Rate

Commercial Paper

CDS