fomc 20080625 text material

Presentation Materials (PDF)

Pages 197 to 253 of the Transcript

Appendix 1: Materials used by Mr. Dudley

Class II FOMC - Restricted FR

Top panel(1)

Title: U.S. Equity IndicesSeries: S&P 500 index, Nasdaq index, and S&P 500 financials indexHorizon: August 1, 2007 - June 20, 2008Description: U.S. equity indices stabilize. Financials continue to underperform relative to broadindices.

Source: Bloomberg

Middle panel(2)

Title: Corporate Credit Spreads and YieldsSeries: Investment grade and high-yield corporate debt option-adjusted spreads and yieldsHorizon: January 1, 2007 - June 20, 2008Description: Investment grade and high-yield corporate debt option-adjusted spreads and yieldsstabilize.

Source: Bloomberg

Bottom panel(3)

Title: Global Credit Default Swap SpreadsSeries: iTraxx Crossover Series 7 and Baa CDS spreadHorizon: May 1, 2007 - June 20, 2008Description: iTraxx Crossover and Baa CDS spreads widen during the intermeeting period.

Source: Bloomberg, Lehman Brothers

Page 2

Top panel(4)

Title: Investment Bank Equity PricesSeries: Equity prices for Morgan Stanley, Goldman Sachs, Lehman Brothers, and Merrill LynchHorizon: January 1, 2008 - June 20, 2008Description: Equity prices for Morgan Stanley, Goldman Sachs, Lehman Brothers, and MerrillLynch decline; the share price of Lehman Brothers significantly underperformed.

Source: Bloomberg

Middle panel(5)

Title: Investment Bank CDS SpreadsSeries: Credit default swap spreads for Morgan Stanley, Goldman Sachs, Lehman Brothers, andMerrill LynchHorizon: January 1, 2008 - June 20, 2008Description: Credit default swap spreads for Morgan Stanley, Goldman Sachs, Lehman Brothers,and Merrill Lynch widen since the April FOMC meeting.

Source: Markit

Bottom panel(6)

Title: Investment Bank Financial Leverage RatiosSeries: Financial leverage ratios for Morgan Stanley, Goldman Sachs, Lehman Brothers, and MerrillLynchHorizon: January 1, 2004 - May 31, 2008Description: Financial leverage ratios for Morgan Stanley, Goldman Sachs, and Lehman Brothersdecline sharply in the second quarter of 2008.

Source: Bloomberg

Page 3

Top panel(7)

Title: Financial Guarantor Equity PricesSeries: Equity prices for Ambac, MBIA, XL-Cap, and AGOHorizon: January 1, 2008 - June 20, 2008Description: Equity prices for Ambac, MBIA, XL-Cap, and AGO decline.

Source: Bloomberg

Middle panel(8)

Title: Financial Guarantor CDS SpreadsSeries: Credit default swap spreads for Ambac, MBIA, XL-Cap, AGO, and FGICHorizon: January 1, 2008 - June 20, 2008Description: Credit default swap spreads for Ambac, MBIA, XL-Cap, AGO, and FGIC widen.

Source: Markit

Bottom panel(9)

Title: Ten- and Thirty-Year AAA-Rated MunicipalsSeries: Ratio of the 10-Year AAA-rated municipal yields to the 10-Year Treasury yield and the ratioof the 30-Year AAA-rated municipal yield to the 30-Year Treasury yieldHorizon: January 1, 2007 - June 20, 2008Description: The ratios of 10- and 30-year AAA-rated municipal debt yields to Treasury yieldscontinue to decline from levels observed in March.

Source: Bloomberg

Page 4

Top panel(10)

Title: One-Month Libor-OIS SpreadsSeries: Spreads between one-month Libor rates and one-month overnight index swap rates for U.S.,U.K., and Euro AreaHorizon: August 14, 2007 - June 20, 2008Description: The spreads between one-month Libor rates and one-month overnight index swap ratesfor the U.S., U.K., and Euro area stabilize at elevated levels.

Source: Bloomberg

Middle panel(11)

Title: Three-Month Libor-OIS SpreadsSeries: Spreads between three-month Libor rate and three-month overnight index swap rates forU.S., U.K., and Euro AreaHorizon: August 14, 2007 - June 20, 2008Description: The spreads between three-month Libor rates and three-month overnight index swaprates for the U.S., U.K., and Euro area stabilize at elevated levels.

Source: Bloomberg

Page 5

Top panel(12)

Title: Federal Reserve Term Auction Facility ResultsSeries: TAF auction size and spread between the TAF stop-out and minimum bid ratesHorizon: December 20, 2007 - June 19, 2008Description: The spread between the TAF stop-out and the minimum bid rates declines since theApril FOMC meeting, and the size of the TAF auctions was increased.

Source: Federal Reserve Board

Middle panel(13)

Title: Central Bank Term Funding Facilities' Bid-to-Cover RatiosSeries: Bid-to-cover ratios for the Federal Reserve Term Auction Facility, the European CentralBank foreign exchange swap line, and Swiss National Bank foreign exchange swap lineHorizon: December 20, 2007 - June 19, 2008Description: Bid-to-cover ratios in the European Central Bank and Swiss National Bank U.S. dollarauctions have recently been higher than the bid-to-cover ratio in the Federal Reserve TAF auctions.

Source: Federal Reserve Board, European Central Bank, Swiss National Bank

Page 6

Top panel(14)

Title: Commodity PricesSeries: GSCI spot, energy, agriculture, and industrial metals indicesHorizon: January 1, 2008 - June 20, 2008Description: The rise in commodity prices during the intermeeting period was largely concentratedin the energy and the agriculture sectors.

Source: Bloomberg

Middle panel(15)

Title: Dollar StabilizesSeries: Yen-USD, Euro-USD, and broad trade-weighted dollarHorizon: January 1, 2008 - June 20, 2008Description: Since the April FOMC meeting, the U.S. dollar has appreciated against the Japaneseyen and stabilized against the euro. The broad trade-weighted dollar has been stable since March.

Source: Bloomberg and Federal Reserve Board

Bottom panel(16)

Title: Correlation Between Weekly Changes in Spot WTI Crude Oil and the Trade-Weighted DollarSeries: Six-month rolling correlation of percent changes in the weekly average of daily closingprices of the WTI spot crude oil price and the Federal Reserve Board's nominal trade-weighted dollarindex, and the one-year moving average of this correlationHorizon: January 1, 1987 - June 2, 2008Description: The correlation between the spot WTI crude oil price and the nominal trade-weighteddollar has been increasing since the beginning of 2005, though has moderated over recent months.

** One-year rolling correlation of percentage changes in the weekly average of daily closing prices of the WTI spot crude oilprice and the Federal Reserve Board's nominal trade-weighted dollar index (vis-à-vis major currencies).

Source: Federal Reserve Board, CEIC

Page 7

Top panel(17)

Title: University of Michigan Inflation ExpectationsSeries: One- and Five-Year University of Michigan Survey Inflation ExpectationsHorizon: June 1, 1980 - June 20, 2008Description: 1- and 5-year University of Michigan Survey inflation expectations increase in recentmonths. The 1-year measure is at its highest level in over 25 years, while the 5-year measure hasrisen only modestly.

Source: Bloomberg

Middle panel(18)

Title: TIPS Implied Average Rate of Inflation: 5-10 Year HorizonSeries: Federal Reserve Board's 5-10 Year horizon TIPS inflation compensation and Barclays' 5-10Year horizon TIPS inflation compensationHorizon: August 1, 2007 - June 20, 2008Description: TIPS inflation compensation over a 5-10 year horizon was relatively unchanged sincethe April FOMC meeting as measured by both the Federal Reserve Board and Barclays.

Source: Federal Reserve Board, Barclays Capital

Page 8

Top panel(19)

Title: Fed Funds Futures CurvesSeries: Fed funds futures curve as of 3/17/2008, 4/29/2008, and 6/20/2008Horizon: March 17, 2008 - June 20, 2008Description: The fed funds futures curve steepens since the April FOMC meeting.

Source: Bloomberg

Middle panel(20)

Title: Eurodollar Futures CurvesSeries: Eurodollar futures curve as of 3/17/2008, 4/29/2008, and 6/20/2008Horizon: March 17, 2008 - June 20, 2008Description: The Eurodollar futures curve has shifted higher since the April FOMC meeting.

Source: Bloomberg

Page 9

Top panel(21)

Title: Distribution of Expected Policy Target Rate Among Primary Dealers Prior to June 25 FOMCMeeting

Series: Dealer expectations for policy target rate by quarter, average forecast for policy target byquarter, and market rate for policy expectation by quarter as of 6/16/2008Horizon: 2008:Q2 - 2009:Q4Description: On average, primary dealers expect lower policy rates than what is currently priced intoEurodollar futures for 2008.

Source: Dealer Policy Survey

Middle panel(22)

Title: Distribution of Expected Policy Target Rate Among Primary Dealers Prior to April 29-30FOMC MeetingSeries: Dealer expectations for policy target rate by quarter, average forecast for policy target byquarter, and market rate for policy expectation by quarter as of 4/21/2008Horizon: 2008:Q2 - 2009:Q4Description: On average, primary dealers expect lower policy rates than what was priced intoEurodollar futures at the time of the April FOMC meeting.

Source: Dealer Policy Survey

Page 10

Top panel(23)

Title: Probabilities for Policy Rate Outcomes for June FOMC MeetingSeries: Probabilities for a 1.50, 1.75, 2.00, or 2.25 percent target rate at the June FOMC meetingHorizon: April 1, 2008 - June 20, 2008Description: At the time of the June 25 FOMC meeting, options on fed funds futures suggested a2.00 percent target rate was the most likely outcome following the meeting.

Source: Federal Reserve Bank of Cleveland

Middle panel(24)

Title: Probabilities for Policy Rate Outcomes for August FOMC MeetingSeries: Probabilities for a 1.75, 2.00, 2.25, or 2.50 percent target rate at the August FOMC meetingHorizon: May 9, 2008 - June 20, 2008Description: At the time of the June 25 FOMC meeting, options on fed funds futures suggested a2.00 percent target rate was the most likely outcome following the August 5 FOMC meeting.

Source: Federal Reserve Bank of Cleveland

Bottom panel(25)

Title: Considerable Tightening Expected Over the Next YearSeries: Spread between the fourth Eurodollar futures contract and the fed funds target rate adjustedbased on forward Libor-fed funds basis swap spreads for the 9/4/1992, 1/31/1996, 11/17/1998,6/25/2003, and 4/30/2008 FOMC meetingsHorizon: September 4, 1992 - April 30, 2008

Description: The magnitude of policy rate increases anticipated over the next year is greater thanthat which was priced in over a similar time horizon at the conclusion of the last 3 policy easingcycles, in 2003, 1998, and 1996.

Note: Dates represent last interest rate cut of previous cycles and assumes 4/30/08 is the last interest rate cut of the currentcycle.

Source: Bloomberg

APPENDIX: Reference Exhibits

Page 11

Top panel(26) Federal Reserve Term Auction Facility Results

December 20, 2007 - June 19, 2008

AuctionSettlement

Term AmountMinimumBid Rate

Stop-outRate

Propositions Bid/Cover Bidders

12/20/2007 28 Days $20 b 4.17% 4.65% $61.6 b 3.08 93

12/27/2007 35 Days $20 b 4.15% 4.67% $57.7 b 2.88 73

1/17/2008 28 Days $30 b 3.88% 3.95% $55.5 b 1.85 56

1/31/2008 28 Days $30 b 3.10% 3.12% $37.5 b 1.25 52

2/14/2008 28 Days $30 b 2.86% 3.01% $58.4 b 1.95 66

2/28/2008 28 Days $30 b 2.81% 3.08% $68.0 b 2.27 72

3/13/2008 28 Days $50 b 2.39% 2.80% $92.6 b 1.85 82

3/27/2008 28 Days $50 b 2.19% 2.62% $88.9 b 1.78 88

4/10/2008 28 Days $50 b 2.11% 2.82% $91.6 b 1.83 79

4/24/2008 28 Days $50 b 2.05% 2.87% $88.9 b 1.77 89

5/8/2008 28 Days $75 b 2.00% 2.22% $96.8 b 1.29 71

5/22/2008 28 Days $75 b 1.99% 2.10% $84.4 b 1.13 75

6/5/2008 28 Days $75 b 2.00% 2.26% $95.9 b 1.28 73

6/19/2008 28 Days $75 b 2.05% 2.36% $89.4 b 1.19 76

Source: Federal Reserve Board

Page 12

Top panel(27) Term Securities Lending Facility Auction Results

AuctionSettlement

Term Collateral AmountMinimumFee Rate

Stop-outRate

Propositions Bid/Cover

3/28/2008 28 Days Schedule 2 $75 b 0.25% 0.33% $86.1 b 1.15

4/4/2008 28 Days Schedule 1 $25 b 0.10% 0.16% $46.9 b 1.88

4/11/2008 28 Days Schedule 2 $50 b 0.25% 0.25% $40.0 b 0.68

AuctionSettlement

Term Collateral AmountMinimumFee Rate

Stop-outRate

Propositions Bid/Cover

4/18/2008 28 Days Schedule 1 $25 b 0.10% 0.10% $35.1 b 1.40

4/25/2008 28 Days Schedule 2 $75 b 0.25% 0.25% $59.5 b 0.79

5/2/2008 28 Days Schedule 1 $25 b 0.10% 0.10% $24.1 b 0.96

5/9/2008 28 Days Schedule 2 $50 b 0.25% 0.25% $28.7 b 0.58

5/16/2008 28 Days Schedule 1 $25 b 0.10% 0.10% $7.2 b 0.29

5/23/2008 28 Days Schedule 2 $75 b 0.25% 0.25% $46.1 b 0.62

5/30/2008 28 Days Schedule 1 $25 b 0.10% 0.10% $16.4 b 0.66

6/6/2008 28 Days Schedule 2 $50 b 0.25% 0.25% $26.9 b 0.54

6/13/2008 28 Days Schedule 1 $25 b 0.10% 0.10% $27.2 b 1.09

6/20/2008 28 Days Schedule 2 $75 b 0.25% 0.25% $36.8 b 0.49

Source: Federal Reserve Bank of New York

Page 13

Top panel(28)

Title: Spread Between Nominal and Inflation Protected Treasury YieldsSeries: Five- and ten-year spreads between nominal and inflation protected Treasury yieldsHorizon: January 1, 2007 - June 20, 2008Description: The spreads between 5- and 10-year nominal and inflation-protected Treasury yieldsincreased since the April FOMC meeting.

Source: Bloomberg

Middle panel(29)

Title: Treasury Yield CurveSeries: Constant maturity Treasury yield curve as of 3/17/2008, 4/29/2008, and 6/20/2008Horizon: March 17, 2008 - June 20, 2008Description: The Treasury yield curve has shifted higher since the April FOMC meeting.

Source: Bloomberg

Bottom panel(30)

Title: Implied Volatility Across MarketsSeries: VIX index, MOVE index, 1-month Euro-Dollar volatility index, and 1-month Dollar-Yenvolatility indexHorizon: January 1, 2007 - June 20, 2008Description: Implied volatility in equity and Treasury markets increased since the April FOMCmeeting, while implied volatility in currency markets stabilized.

Source: Bloomberg

Appendix 2: Materials used by Messrs. Sheets, Slifman, and Wascher

Material for Staff Presentation on the Economic OutlookJune 24, 2008

CLASS II FOMC - Restricted (FR)

Exhibit 1Outlook for Foreign Growth

Top panelReal GDP Projections*

Percent change, annual rate**

2007 20082009

Q1-Q3 Q4 Q1 Q2 H2

1. Total Foreign 4.5 3.0 2.9 2.2 2.6 3.4

2. Advanced Foreign 2.9 1.4 1.5 1.0 1.2 2.1

3. Canada 3.4 0.8 -0.3 1.0 1.2 2.2

4. Japan 0.9 2.9 4.0 0.6 1.0 1.6

5. Euro Area 2.4 1.3 3.2 0.7 1.1 2.1

6. United Kingdom 3.0 2.5 1.6 1.0 0.7 1.7

7. Emerging Markets 6.7 5.1 4.8 3.8 4.5 5.1

8. Mexico 4.2 3.3 2.1 1.2 2.7 3.6

9. China 11.6 10.6 11.7 8.7 8.8 9.6

* Aggregates weighted by U.S. merchandise export shares. Return to text

** Year is Q4/Q4; half year is Q4/Q2; Q1-Q3 is Q3/Q4. Return to table

Middle-left panelJapan

A line chart shows Japanese manufacturing output and the ratio of job openings to applicants for theperiod of 2006-2008. Japanese manufacturing output increased eight percent between 2006 and early2008, but in recent months it has fallen slightly. Meanwhile, the ratio of Japanese job openings toapplicants fell below 1.00 in late 2007, reaching a low of around 0.93 at the time of this briefing.

Middle-right panelEuro Area

A line chart for the Euro Area shows the 12-month percent change for retail sales and the totalpurchasing managers' index for the period of 2006-2008. The 12-month percent change for EuroArea retail sales has been mostly negative since the last quarter of 2007, falling to a value of -2percent at the end of 2008:Q1. Similarly, the purchasing managers' index has also been falling, andthe June 2008 flash estimate is slightly contractionary at less than 50.

Bottom panelReal GDP Growth

pp p

A line chart shows the Q4/Q4 percent change of GDP aggregates weighted by U.S. merchandiseexport shares for the United States, advanced foreign economies, and emerging market economiesfrom 1970 through 2009. It indicates U.S. recessions*, and it forecasts the period from 2008-2009.U.S. GDP growth falls to zero or negative for every recession, and these periods also see a drop inboth advanced and emerging market economies' GDP growth as well. In the recession in 2001, allthree fell to less than 2%, with emerging market economies experiencing a slightly negative GDPgrowth at that time. In the forecast period, growth for the U.S. and advanced foreign economies isexpected to hover around 2%, while GDP growth for emerging market economies is forecasted tofall from 6% in 2007 to almost 4% in 2008, then recover slightly to 5% by 2009.

* Shaded bars indicate periods of business recession as defined by the National Bureau of Economic Research (NBER):1969:Q4-1970:Q4, 1973:Q4-1975:Q1, 1980:Q1-1980:Q3, 1981:Q3-1982:Q4, 1990:Q3-1991:Q1, and2001:Q1-2001:Q4. Return to text

Exhibit 2Oil Market

Top-left panelWest Texas Intermediate

A line chart shows the monthly spot price and far-dated futures price of West Texas Intermediatefrom 2005, including the forecast of the spot price from mid-2008 through 2009. The forecast fromthe January chart show is included for comparison. While spot and futures prices hovered between50-80 dollars per barrel between 2005 and 2007, in late 2007 they began to rise rapidly and the spotprice of WTI closed yesterday at $136 per barrel. The far-dated futures price climbed in the samemanner and is now at about the same level. Prices are forecasted to remain at this elevated levelthrough the forecast period, which is about $50 higher than was forecasted in January.

Top-right panelOECD Private Inventories of Oil and Products

A line chart shows the OECD Private Inventories of Oil and Products from 2005-2008, along withthe five-year average level historical range of ± 1 standard deviation. This includes both crude oiland petroleum products and excludes official inventories. In the past few years, inventories havebeen at the upper end of their historical range, but since mid-2007 they have been falling fromaround 2700 million barrels to a current level of about 2550 million barrels, which is towards thecenter of their historical range.

Source: International Energy Agency.

Middle panelWorld Oil Balance

Millions of barrels per day

2005 2006 2007 2008%

change05-08

1. Consumption 83.8 84.9 86.0 86.8 3.6

2. Advanced Economies 45.4 45.2 44.8 44.4 -2.2

3. United States 21.2 21.0 21.2 20.6 -2.8

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2005 2006 2007 2008% change

05-08

4. Emerging Markets 38.4 39.7 41.1 42.4 10.4

5. China 6.7 7.2 7.5 8.0 19.4

6. Middle East 6.0 6.2 6.5 6.8 13.3

7. Production 84.6 85.4 85.5 87.0 2.8

8. OPEC 34.3 34.4 33.9 35.1 2.3

9. Non-OPEC 50.3 51.0 51.6 51.9 3.2

10. Implied Stockbuild and Discrepancy 0.8 0.5 -0.5 0.2 --

Source: International Energy Agency and staff estimates. Non-OPEC production includes Angola and Ecuador.

Bottom-left panelWorld Oil Production and GDP

A line chart shows oil production, indexed to 2002:Q1, and world GDP weighted by oil consumptionshares. While world GDP has increased 30% since 2002, oil production has remained flat at only10% higher than the 2002 level. Oil production is forecasted to increase slightly in 2008 to about15% higher than the 2002 level.

Bottom-right panelProved Oil Reserves

A stacked bar chart shows proven oil reserves from 1995 through 2006. Reserves in this period havebeen steady, continuously forecasted to contain 40 remaining years of reserves*. Since 1999, theavailability of Canadian oil sands** adds about 5 additional years to these figures.

* Proved reserves/current oil production. Return to text

** Data unavailable before 1999. Return to text

Source: BP Statistical Review of World Energy.

Exhibit 3

Non-fuel Commodities

Top-left panelNon-fuel Commodity Prices

A line chart shows non-fuel commodity prices as an index from 2005 through the forecast period tothe end of 2009. Prices rose 50% above their 2005 level by the end of 2007, and in the first half of2008 prices have risen to 70% above their 2005 level. This is in contrast to the January forecast,which predicted prices to remain at the 2007 level.

Middle-left panelInventories of Selected Commodities

A line chart shows the inventories (weeks of consumption*) of wheat, corn, zinc, and copper from2002 to 2008. All four have seen declining inventories. Wheat fell from about 14 weeks ofconsumption to 9 by 2007, then ticked up to 11 weeks of consumption by the middle of 2008. Cornhas fallen from 10 to 7 weeks of consumption, and copper from 7 to 2 weeks of consumption. Zincinventories fell from a level of 8 weeks of consumption in 2002 to 4 by mid-2006, and have

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remained at that level in the intervening period.

* Period-end stocks/annual consumption. For grains, 2008 is USDA estimate. For metals, 2008 is stock at end of March over2007 usage. Return to text

Bottom-left panelPrices of Selected Commodities

A line chart shows the price of copper, wheat, corn, and zinc from 2005-2008 on a weekly basis.Wheat has risen from $3.6 per bushel in 2005 to $14 per bushel by the beginning of 2008, and hassince fallen slightly and is now about $11 per bushel. Corn has risen from $2.5 per bushel to about$6.5 per bushel at the time of this briefing. Copper increased from $1.8 per pound in 2005 to $4.4 byearly 2006, and has remained around that level through mid-2008. Zinc rose from $0.5 per pound in2005 to about $2 per pound by late 2006, but has since fallen and is now at about $1 per pound.

Other Explanations for Recent Moves in Commodity Prices

Top-right panelRole of Speculators?

Prices of commodities not traded in futures markets have also risen.Inventories are relatively tight.No evidence that positions taken by non-commercial traders predict commodity prices.

Middle-right panelCorrelations: Commodity Prices and the Dollar

A line chart shows the 60-day moving correlation of WTI oil price and non-fuel commodity prices**with the broad nominal dollar index from 2004 to 2008.

The correlation of WTI oil price with the dollar began at -0.5 in early 2004. It rose to 0.1 by themiddle of that year, and continued to fluctuate between about 0.1 and -0.3 through mid-2006,reaching a high of 0.2 in 2005 and a low of -0.5 in 2006. Since late 2005 the correlation hasremained negative, with a value of -0.4 at the time of this briefing.

The correlation of non-fuel commodity prices with the dollar has shown a similar trend, starting at-0.2 in 2004, rising to almost 0 by the end of 2004, then falling to nearly -0.7 in early 2005. Sincethen, the correlation has fluctuated between -0.6 and 0.1, with a current value of about -0.3.

** Commodity Research Bureau index. Return to text

Bottom-right panelCorrelations: Commodity Prices and Interest Rates

A line chart shows the 60-day moving correlation of WTI oil price and non-fuel commodity prices**with the three-month Treasury bill interest rate from 2004 to 2008. Both series fluctuate greatlyaround zero.

The oil price correlation starts at -0.1 in 2004, falls to -0.4 by the end of that year, then continues tofluctuate between -0.3 and 0.2, ending at the time of this briefing at -0.2.

The correlation of non-fuel commodity prices also starts at -0.1 in 2004, similarly rises to 0.3 byearly 2005, and fluctuates in a similar manner, reaching a low of -0.4 and a high of 0.4 in the periodfrom 2004-2008. At the time of this briefing, the correlation of non-fuel commodity prices is alsoabout -0.2.

** Commodity Research Bureau index. Return to text

Exhibit 4Outlook for Foreign Inflation

Top-left panelOutlook for Inflation

A line chart shows the inflation outlook for emerging and advanced foreign economies from 2006through the forecast of 2009. The inflation outlook for emerging markets rose from 3% in 2006 to7% by the second half of 2007. Although our January Greenbook forecasted inflation for EMEsfalling to 3.5% by early 2008, inflation has remained around 7%. However, our current forecastanticipates inflation gradually falling to that level of 3.5 % by late-2009. AFE inflation began 2006 atabout 2%, and fell to 0.5% in late 2006, but has been generally increasing to its current level of about3%. The January Greenbook forecasted AFE inflation falling to just under 2% by 2008:Q1. Ourcurrent forecast expects it to remain around 3% until later this year, when we anticipate it falling to2% by the end of the year.

Top-right panelsInflation Compensation

Two line charts. The top chart shows Euro area* and far-dated euro area** compensation from2006-2008. These have both fluctuated slightly between an initial level of 2.1% and 2.4%, and in thepast quarter have risen to 2.6%. The bottom chart shows Canada*** compensation from 2006-2008.The inflation compensation for Canada hovered around 2.7% in early 2006, then slowly declined to2% by late 2007, but has since risen sharply to 2.6% at the time of this briefing.

* Next ten years, break-even inflation. Return to text

** Five-to-ten years ahead, derived from inflation swaps. Return to text

*** Next 15 years, break-even inflation. Return to text

Bottom-left panelPolicy Interest Rates

A line chart shows policy interest rates for the Bank of England, Bank of Canada, and EuropeanCentral Bank from 2005 through the forecast period to the end of 2009. Bank of England's rate was4.75% in the beginning of 2005, stepped down to 4.5% by the middle of that year through mid-2006,then stepped up to 5.75% by late 2007. Since then it has been stepping down to a current rate of 5%.Though our April forecast anticipated a slight continuation of this loosening, current forecastestimates anticipate an increase in the policy rate to 5.5% in coming months and rates remaining atthis level until late 2009. The Bank of Canada maintained a rate of 2.5% through most of 2005, whenit began stepping up tightening, reaching a rate of 4.25% from mid-2006 to mid-2007, then a rate of4.5% for the second half of 2007. In the beginning of 2008 the Bank of Canada began looseningpolicy to a current rate of 3%. Our April forecast anticipated a continued loosening to a rate of 2.5%,but our current forecast anticipates rates remaining at 3% through the forecast period. The ECBmaintained a rate of 2% through 2005, at which point it began stepping up rates to a level of 4%,which it maintained from mid-2007 to present. Our April Greenbook forecasted a loosening of theECB rate to 3.5%, but our current forecasts anticipates a slight tightening to 4.25% in comingmonths.

Bottom-right panelConsumer Prices in Selected Emerging Markets

A line chart shows the 12-month percent change of Chinese and Mexican core* and headlineinflation from 2005 to 2008. Chinese headline inflation started at 2% in the beginning of 2005,briefly spiked to 4%, then fell to about 1.5% through the end of 2006. In late 2006, Chinese headlineinflation began rising rapidly, reaching a peak of nearly 9% at the beginning of 2008. It has sincedeclined slightly to about 7.5% in mid-2008. Chinese core inflation has been much steadier,remaining around 1% over the sample period. Mexican headline inflation remained roughly around4% from 2005-2008, but in the past few month it has risen to 5%. Mexican core inflation stayedabout 3% from 2005-2007, but since the beginning of this year it too has slightly trended up to 3.5%.

* Excluding food and energy prices. Return to text

Exhibit 5U.S. External Sector

Top-left panelBroad Real Dollar

A line chart shows the broad real dollar from 2006 through the projection period to 2009. It iscurrently about 13% lower than its January 2006 level, which is slightly lower than was projected inthe January 2008 Greenbook, and it is now projected to depreciate at a 3% rate throughout theforecast period.

Top-right panelCore Import Prices

A line chart shows core import prices from 2005 through the projection period to 2009. Core importprices inflation fluctuated at a 2-3% annual rate from 2005 through the end of 2007, and the JanuaryGreenbook forecasted import price inflation to fall to about 1% in the second quarter of 2008 andremain there through the forecast period. However, in the last few months core import prices havesurged at a 10½% annual rate. Our current forecast expects this to fall in the near future and return toan annual rate of 1-2% by the end of this year.

Bottom panelU.S. Trade Outlook

2007 2008 2009

H1 H2 Q1 Q2 H2

Growth rates (percent, annual rate*)

1. Real exports 4.3 12.6 5.6 7.2 7.2 7.5

2. Real imports 0.5 1.4 -0.5 -6.7 1.0 2.8

Contribution to U.S. real GDP growth (percentage points, annual rate*)

3. Real net exports 0.4 1.2 0.8 2.1 0.7 0.5

Memo:

4. Current account balance (percent of GDP) -5.7 -4.9 -5.0 -5.1 -5.4 -4.6

5. Non-oil trade balance (percent of GDP) -3.1 -2.3 -1.8 -1.7 -1.3 -0.8

* Year is Q4/Q4; half years are Q2/Q4 or Q4/Q2. Return to table

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e p p

Exhibit 6Recent Indicators

Top-left panelConsumer Sentiment Index

Index, 1966 = 100

Period Reuters/Michigan

January 2000 112.0

February 2000 111.3

March 2000 107.1

April 2000 109.2

May 2000 110.7

June 2000 106.4

July 2000 108.3

August 2000 107.3

September 2000 106.8

October 2000 105.8

November 2000 107.6

December 2000 98.4

January 2001 94.7

February 2001 90.6

March 2001 91.5

April 2001 88.4

May 2001 92.0

June 2001 92.6

July 2001 92.4

August 2001 91.5

September 2001 81.8

October 2001 82.7

November 2001 83.9

December 2001 88.8

January 2002 93.0

February 2002 90.7

March 2002 95.7

April 2002 93.0

May 2002 96.9

June 2002 92.4

July 2002 88.1


August 2002 87.6

September 2002 86.1

October 2002 80.6

November 2002 84.2

December 2002 86.7

January 2003 82.4

February 2003 79.9

March 2003 77.6

April 2003 86.0

May 2003 92.1

June 2003 89.7

July 2003 90.9

August 2003 89.3

September 2003 87.7

October 2003 89.6

November 2003 93.7

December 2003 92.6

January 2004 103.8

February 2004 94.4

March 2004 95.8

April 2004 94.2

May 2004 90.2

June 2004 95.6

July 2004 96.7

August 2004 95.9

September 2004 94.2

October 2004 91.7

November 2004 92.8

December 2004 97.1

January 2005 95.5

February 2005 94.1

March 2005 92.6

April 2005 87.7

May 2005 86.9

June 2005 96.0

July 2005 96.5

August 2005 89.1


September 2005 76.9

October 2005 74.2

November 2005 81.6

December 2005 91.5

January 2006 91.2

February 2006 86.7

March 2006 88.9

April 2006 87.4

May 2006 79.1

June 2006 84.9

July 2006 84.7

August 2006 82.0

September 2006 85.4

October 2006 93.6

November 2006 92.1

December 2006 91.7

January 2007 96.9

February 2007 91.3

March 2007 88.4

April 2007 87.1

May 2007 88.3

June 2007 85.3

July 2007 90.4

August 2007 83.4

September 2007 83.4

October 2007 80.9

November 2007 76.1

December 2007 75.5

January 2008 78.4

February 2008 70.8

March 2008 69.5

April 2008 62.6

May 2008 59.8

June 2008 (p) 56.7

Note: Gray shading represents NBER recession dates (March 2001-November 2001).

p - Preliminary Return to table

Top-right panel

Business Sentiment

Diffusion index

Period Empire index* Philadelphia index*

January 2002 48.97 52.41

February 2002 53.06 53.16

March 2002 48.79 53.66

April 2002 54.12 53.81

May 2002 50.28 52.76

June 2002 50.90 57.81

July 2002 44.66 50.66

August 2002 49.22 47.26

September 2002 49.47 50.06

October 2002 42.52 44.11

November 2002 48.11 51.41

December 2002 48.78 51.66

January 2003 52.12 49.46

February 2003 44.18 46.86

March 2003 45.29 45.51

April 2003 37.28 44.01

May 2003 51.89 47.41

June 2003 58.89 49.51

July 2003 55.24 51.51

August 2003 53.20 58.46

September 2003 56.14 58.31

October 2003 63.90 62.11

November 2003 62.73 61.21

December 2003 60.98 61.51

January 2004 63.94 64.41

February 2004 64.10 61.66

March 2004 58.73 62.16

April 2004 64.29 63.21

May 2004 62.82 62.21

June 2004 59.34 63.01

July 2004 63.03 64.96

August 2004 53.51 61.36

September 2004 60.09 57.66

October 2004 57.82 61.66


November 2004 53.24 57.51

December 2004 57.67 61.41

January 2005 55.28 52.51

February 2005 53.49 58.06

March 2005 55.03 54.56

April 2005 49.70 59.31

May 2005 42.46 52.26

June 2005 49.29 47.11

July 2005 57.37 51.76

August 2005 57.84 55.26

September 2005 54.66 51.46

October 2005 51.72 50.66

November 2005 54.41 53.01

December 2005 58.11 55.31

January 2006 55.83 48.51

February 2006 54.87 54.41

March 2006 60.12 54.01

April 2006 55.53 53.26

May 2006 54.54 54.41

June 2006 58.44 53.61

July 2006 53.57 49.81

August 2006 52.64 56.61

September 2006 53.74 47.96

October 2006 55.38 49.41

November 2006 56.55 50.16

December 2006 56.44 48.36

January 2007 50.64 49.46

February 2007 56.17 47.81

March 2007 48.83 47.76

April 2007 49.02 47.26

May 2007 50.57 49.71

June 2007 57.26 56.51

July 2007 58.38 51.11

August 2007 58.11 50.51

September 2007 53.46 52.26

October 2007 59.18 51.86

November 2007 57.54 51.41


December 2007 50.42 46.86

January 2008 50.03 37.21

February 2008 39.66 35.66

March 2008 34.40 38.96

April 2008 45.83 35.21

May 2008 43.90 39.86

June 2008 41.18 39.11

* Index means are normalized. Return to table

Middle-left panelChange in Private Payroll Employment

Period Thousands of employees April GB

January 2000 241.00 ND

February 2000 187.00 ND

March 2000 216.33 ND

April 2000 216.00 ND

May 2000 145.00 ND

June 2000 103.67 ND

July 2000 92.33 ND

August 2000 143.33 ND

September 2000 146.67 ND

October 2000 79.33 ND

November 2000 139.67 ND

December 2000 96.33 ND



March 2001 -42.00 ND

April 2001 -135.67 ND

May 2001 -159.33 ND

June 2001 -215.00 ND

July 2001 -163.33 ND

August 2001 -200.67 ND

September 2001 -211.33 ND

October 2001 -273.00 ND

November 2001 -323.00 ND

December 2001 -302.67 ND

January 2002 -234.67 ND


February 2002 -173.67 ND

March 2002 -126.33 ND

April 2002 -107.33 ND

May 2002 -80.00 ND

June 2002 -55.00 ND

July 2002 -53.33 ND

August 2002 -47.67 ND

September 2002 -55.00 ND



December 2002 -21.33 ND

January 2003 -44.00 ND


March 2003 -103.00 ND

April 2003 -129.33 ND

May 2003 -70.00 ND

June 2003 -17.67 ND

July 2003 -7.00 ND

August 2003 -2.67 ND







March 2004 155.00 ND

April 2004 184.67 ND

May 2004 277.00 ND

June 2004 217.00 ND

July 2004 152.33 ND

August 2004 81.33 ND








March 2005 143.00 ND

April 2005 213.33 ND

May 2005 199.00 ND

June 2005 250.00 ND

July 2005 239.00 ND

August 2005 251.33 ND







March 2006 250.67 ND

April 2006 206.33 ND

May 2006 129.00 ND

June 2006 82.67 ND

July 2006 99.33 ND

August 2006 151.67 ND







March 2007 89.33 ND

April 2007 63.33 ND

May 2007 108.67 ND

June 2007 85.33 ND

July 2007 105.67 ND

August 2007 70.67 ND





January 2008 -16.33 ND


March 2008 -97.00 ND


April 2008 -84.00 ND

May 2008 -69.67 -143.00

Note: Three-month moving average. Gray shading represents NBER recession dates (March 2001-November 2001).

ND No data Return to table

Middle-right panelReal Goods PCE, Excluding Motor Vehicles

Billions of chained 2000 dollars

Period Current April GB



December 2007 3224.7 3224.7

January 2008 3231.5 3224.8

February 2008 3228.3 3222.9

March 2008 3250.4 3225.2

April 2008 3269.2 3212.9

May 2008 3284.1 3219.9

Percent change, a.r.

Current April GB

2008:Q1 0.0 -1.5

2008:Q2 5.8 -0.6

2008:Q3 3.2 0.0

Bottom-left panelBusiness Spending Indicators

(Percent change from previous month; monthly rate)

2008

Feb. March April

Shipments* -1.3 0.8 0.2

Orders* -0.9 -1.0 4.0

Nonresidential construction put in place 1.1 1.2 1.6

* Nondefense capital goods, excluding aircraft. Return to table

Bottom-right panelSales of Light Vehicles

Millions of units, annual rate

Period Sales

Period Sales

January 2006 17.51

February 2006 16.51

March 2006 16.52

April 2006 16.63

May 2006 16.24

June 2006 16.21

July 2006 16.87

August 2006 16.10


October 2006 16.24

November 2006 16.09

December 2006 16.91

January 2007 16.30

February 2007 16.50

March 2007 16.20

April 2007 16.21

May 2007 16.27

June 2007 15.62

July 2007 15.22

August 2007 16.22


October 2007 16.02

November 2007 16.14

December 2007 16.17

January 2008 15.26

February 2008 15.31

March 2008 15.05

April 2008 14.40

May 2008 14.25

As shown in the figure, the range of industry forecasts for June 2008 is approximately 13.2-14.2 million units (annual rate).

Exhibit 7Key Background Factors and Medium-Term Outlook

Top panelFactors Affecting GDP Forecast

Revised up the forecast for Q1 and Q2 in light of the incoming information.

Tempered our judgmental adjustments; but we still anticipate recession-like and financialturmoil effects to show through to spending for the next few quarters.Residential investment still a drag on economic growth well into next year.Ratio of household net worth to income remains on a downward trajectory.Higher oil pricesTighter monetary policyFaster potential GDP growth

Middle-left panelOil Price

Dollars per barrel

Period Oil Price April GB Forecast

2005:Q1 49.68 ND ND

2005:Q2 53.09 ND ND

2005:Q3 63.08 ND ND

2005:Q4 60.03 ND ND

2006:Q1 63.34 ND ND

2006:Q2 70.53 ND ND

2006:Q3 70.44 ND ND

2006:Q4 60.04 ND ND

2007:Q1 58.02 ND ND

2007:Q2 64.97 ND ND

2007:Q3 75.48 ND ND

2007:Q4 90.75 ND ND

2008:Q1 97.91 97.91 ND

2008:Q2 ND 116.63 123.65

2008:Q3 ND 116.54 135.28

2008:Q4 ND 114.76 136.42

2009:Q1 ND 113.18 136.64

2009:Q2 ND 111.84 136.39

2009:Q3 ND 110.71 136.00

2009:Q4 ND 109.81 135.70

Note: West Texas intermediate spot price.

Effect of Oil Price Surprise SinceApr. GB on Q4/Q4 GDP Growth

2008 -0.2 p.p.

2009 -0.3 p.p.

Middle-right panelFederal Funds Rate

Percent

Period Target Federal Funds Rate April GB Forecast

14 December 2004 2.25 ND ND

2 February 2005 2.50 ND ND

22 March 2005 2.75 ND ND

3 May 2005 3.00 ND ND

30 June 2005 3.25 ND ND

9 August 2005 3.50 ND ND

20 September 2005 3.75 ND ND

1 November 2005 4.00 ND ND


31 January 2006 4.50 ND ND

28 March 2006 4.75 ND ND

10 May 2006 5.00 ND ND

29 June 2006 5.25 ND ND



25 October 2006 5.25 ND ND



21 March 2007 5.25 ND ND

9 May 2007 5.25 ND ND

28 June 2007 5.25 ND ND



31 October 2007 4.50 ND ND




18 March 2008 2.25 ND ND

30 April 2008 2.00 ND ND

2008:Q2 ND 2.00 2.00

2008:Q3 ND 1.75 2.00

2008:Q4 ND 1.75 2.00

2009:Q1 ND 1.75 2.20

2009:Q2 ND 1.75 2.50

2009:Q3 ND 1.75 2.75

2009:Q4 ND 1.75 2.75

[Note: Except 22 January 2008, the dates are those of regularly scheduled Federal Open Market Committee meetings.]

Bottom-left panelReal GDP Forecast

(Percent change; annual rate)

Current April GB

2008:Q1 1.1 0.4

2008:Q2 1.7 -1.4

2008:H2 0.7 0.9

2009 2.4 2.8

Note: Half year figure is Q4/Q2; annual figure is Q4/Q4.

Bottom-right panelGDP Gap

Percent

Period GDP Gap April GB Forecast

2005:Q1 -0.41 ND ND

2005:Q2 -0.29 ND ND

2005:Q3 0.23 ND ND

2005:Q4 -0.05 ND ND

2006:Q1 0.53 ND ND

2006:Q2 0.53 ND ND

2006:Q3 0.20 ND ND

2006:Q4 0.12 ND ND

2007:Q1 -0.36 ND ND

2007:Q2 -0.04 ND ND

2007:Q3 0.53 ND ND

2007:Q4 0.06 ND ND

2008:Q1 -0.28 -0.32 ND

2008:Q2 ND -1.24 -0.47

2008:Q3 ND -1.50 -0.87

2008:Q4 ND -1.89 -1.37

2009:Q1 ND -2.03 -1.65

2009:Q2 ND -1.81 -1.60

2009:Q3 ND -1.57 -1.53

2009:Q4 ND -1.33 -1.45

Note: Percent difference between actual and potential. A negative number indicates that the economy is operating belowpotential.

Exhibit 8Housing

Top-left panelVacancy Rate: Single-family Homes*

QuarterlyPercent

Period Vacancy Rate

1980:Q1 1.2

1980:Q2 1.2

1980:Q3 1.2

1980:Q4 1.1

1981:Q1 1.1

1981:Q2 1.0

1981:Q3 1.2

1981:Q4 1.1

1982:Q1 1.1

1982:Q2 1.2

1982:Q3 1.3

1982:Q4 1.3

1983:Q1 1.1

1983:Q2 1.2

1983:Q3 1.4

1983:Q4 1.4

1984:Q1 1.3

1984:Q2 1.3

1984:Q3 1.5

1984:Q4 1.4

1985:Q1 1.4

1985:Q2 1.5

1985:Q3 1.4

1985:Q4 1.3

1986:Q1 1.3

1986:Q2 1.4

1986:Q3 1.4

1986:Q4 1.3

1987:Q1 1.4

1987:Q2 1.4

1987:Q3 1.4

Period Vacancy Rate

1987:Q4 1.3

1988:Q1 1.3

1988:Q2 1.3

1988:Q3 1.3

1988:Q4 1.3

1989:Q1 1.4

1989:Q2 1.4

1989:Q3 1.6

1989:Q4 1.5

1990:Q1 1.4

1990:Q2 1.3

1990:Q3 1.4

1990:Q4 1.4

1991:Q1 1.3

1991:Q2 1.4

1991:Q3 1.5

1991:Q4 1.3

1992:Q1 1.3

1992:Q2 1.3

1992:Q3 1.3

1992:Q4 1.2

1993:Q1 1.2

1993:Q2 1.1

1993:Q3 1.1

1993:Q4 1.2

1994:Q1 1.2

1994:Q2 1.2

1994:Q3 1.2

1994:Q4 1.4

1995:Q1 1.3

1995:Q2 1.4

1995:Q3 1.4

1995:Q4 1.4

1996:Q1 1.4

1996:Q2 1.3

1996:Q3 1.4

1996:Q4 1.4

Period Vacancy Rate

1997:Q1 1.5

1997:Q2 1.5

1997:Q3 1.4

1997:Q4 1.5

1998:Q1 1.6

1998:Q2 1.5

1998:Q3 1.6

1998:Q4 1.6

1999:Q1 1.6

1999:Q2 1.5

1999:Q3 1.5

1999:Q4 1.5

2000:Q1 1.5

2000:Q2 1.3

2000:Q3 1.4

2000:Q4 1.4

2001:Q1 1.4

2001:Q2 1.5

2001:Q3 1.6

2001:Q4 1.7

2002:Q1 1.5

2002:Q2 1.5

2002:Q3 1.5

2002:Q4 1.6

2003:Q1 1.6

2003:Q2 1.5

2003:Q3 1.7

2003:Q4 1.6

2004:Q1 1.5

2004:Q2 1.5

2004:Q3 1.6

2004:Q4 1.6

2005:Q1 1.6

2005:Q2 1.6

2005:Q3 1.8

2005:Q4 1.8

2006:Q1 1.8

Period Vacancy Rate

2006:Q2 1.9

2006:Q3 2.1

2006:Q4 2.2

2007:Q1 2.5

2007:Q2 2.3

2007:Q3 2.4

2007:Q4 2.5

2008:Q1 2.6

* Vacant units for sale relative to all units (vacant plus occupied). Return to text

Top-right panelHouse Prices

QuarterlyPercent change, annual rate

Period House Prices Forecast

2000:Q1 7.23 ND

2000:Q2 6.88 ND

2000:Q3 6.50 ND

2000:Q4 6.90 ND

2001:Q1 7.54 ND

2001:Q2 6.80 ND

2001:Q3 6.43 ND

2001:Q4 6.30 ND

2002:Q1 6.75 ND

2002:Q2 7.45 ND

2002:Q3 8.11 ND

2002:Q4 8.03 ND

2003:Q1 6.92 ND

2003:Q2 6.61 ND

2003:Q3 8.33 ND

2003:Q4 8.47 ND

2004:Q1 8.82 ND

2004:Q2 8.75 ND

2004:Q3 9.90 ND

2004:Q4 9.86 ND

2005:Q1 9.06 ND

2005:Q2 9.95 ND

2005:Q3 10.03 ND

Period House Prices Forecast

2005:Q4 8.92 ND

2006:Q1 6.90 ND

2006:Q2 3.92 ND

2006:Q3 1.82 ND

2006:Q4 3.21 ND

2007:Q1 3.76 ND

2007:Q2 2.06 ND

2007:Q3 -1.88 ND

2007:Q4 -5.47 ND

2008:Q1 -6.74 ND

2008:Q2 ND -7.21

2008:Q3 ND -7.39

2008:Q4 ND -7.46

2009:Q1 ND -7.49

2009:Q2 ND -6.21

2009:Q3 ND -4.50

2009:Q4 ND -2.70

Source: OFHEO purchase-only index.

Middle-left panelPerception of Falling House Prices

Percent of homeowners reporting decline in their housepricePercent of respondents

Period Past 12 months Next 12 months

January 2004 6 ND

February 2004 5 ND

March 2004 2 ND

April 2004 3 ND

May 2004 3 ND

June 2004 5 ND

July 2004 6 ND

August 2004 3 ND

September 2004 7 ND

October 2004 4 ND

November 2004 4 ND

December 2004 3 ND

January 2005 4 ND


February 2005 3 ND

March 2005 5 ND

April 2005 3 ND

May 2005 4 ND

June 2005 4 ND

July 2005 4 ND

August 2005 3 ND

September 2005 5 ND

October 2005 3 ND

November 2005 4 ND

December 2005 6 ND

January 2006 3 ND

February 2006 3 ND

March 2006 5 ND

April 2006 5 ND

May 2006 6 ND

June 2006 5 ND

July 2006 7 ND

August 2006 10 ND

September 2006 12 ND

October 2006 16 ND

November 2006 17 ND

December 2006 14 ND

January 2007 13 ND

February 2007 16 ND

March 2007 18 12

April 2007 20 13

May 2007 14 13

June 2007 18 16

July 2007 17 14

August 2007 22 17

September 2007 24 20

October 2007 28 22

November 2007 27 20

December 2007 31 23

January 2008 31 21

February 2008 35 26


March 2008 36 22

April 2008 44 26

May 2008 42 27

June 2008 36 23

Middle-right panelHouse Price Overvaluation and Renters' Homebuying Attitudes

House Price OvervaluationPercent

Period Estimated overvaluation Forecast

2001:Q1 2.50 ND

2001:Q2 3.03 ND

2001:Q3 3.18 ND

2001:Q4 3.10 ND

2002:Q1 3.74 ND

2002:Q2 4.63 ND

2002:Q3 5.30 ND

2002:Q4 6.10 ND

2003:Q1 6.68 ND

2003:Q2 7.29 ND

2003:Q3 8.98 ND

2003:Q4 10.17 ND

2004:Q1 11.18 ND

2004:Q2 12.94 ND

2004:Q3 14.12 ND

2004:Q4 15.50 ND

2005:Q1 16.80 ND

2005:Q2 18.26 ND

2005:Q3 19.79 ND

2005:Q4 21.31 ND

2006:Q1 22.09 ND

2006:Q2 22.30 ND

2006:Q3 21.45 ND

2006:Q4 20.59 ND

2007:Q1 20.16 ND

2007:Q2 19.86 ND

2007:Q3 18.53 ND

Period Estimated overvaluation Forecast

2007:Q4 15.54 ND

2008:Q1 12.32 ND

2008:Q2 ND 9.74

2008:Q3 ND 7.13

2008:Q4 ND 4.23

2009:Q1 ND 1.29

2009:Q2 ND -1.27

2009:Q3 ND -3.42

2009:Q4 ND -5.06

Source: Staff estimate from model of price-rent ratio.

Renters' Homebuying AttitudesPercent

Period Renters saying bad time to buy

2001 22.9

2002 22.1

2003 22.7

2004 29.8

2005 39.9

2006 48.8

2007 47.6

2008:H1 47.7

Source: Reuters/Michigan Survey microdata files.

Bottom-left panelSales of Single-family Homes

Millions

Period New Homes Existing HomesNew Homes

ForecastExisting Homes

Forecast

January 1999 0.88 4.68 ND ND

February 1999 0.85 4.56 ND ND

March 1999 0.86 4.60 ND ND

April 1999 0.92 4.56 ND ND

May 1999 0.89 4.66 ND ND

June 1999 0.92 4.87 ND ND

July 1999 0.90 4.72 ND ND

August 1999 0.89 4.72 ND ND

September 1999 0.83 4.60 ND ND

October 1999 0.87 4.58 ND ND



Forecast

November 1999 0.86 4.53 ND ND

December 1999 0.87 4.55 ND ND

January 2000 0.87 4.64 ND ND


March 2000 0.90 4.64 ND ND

April 2000 0.84 4.63 ND ND

May 2000 0.86 4.57 ND ND

June 2000 0.79 4.57 ND ND

July 2000 0.89 4.55 ND ND

August 2000 0.85 4.60 ND ND


October 2000 0.93 4.65 ND ND



January 2001 0.94 4.55 ND ND


March 2001 0.94 4.83 ND ND

April 2001 0.91 4.73 ND ND

May 2001 0.89 4.68 ND ND

June 2001 0.88 4.82 ND ND

July 2001 0.88 4.81 ND ND

August 2001 0.87 4.85 ND ND


October 2001 0.87 4.65 ND ND



January 2002 0.88 5.22 ND ND


March 2002 0.92 4.98 ND ND

April 2002 0.94 5.00 ND ND

May 2002 0.98 4.97 ND ND

June 2002 0.96 4.86 ND ND

July 2002 0.96 4.78 ND ND

August 2002 1.01 4.73 ND ND


October 2002 1.01 5.02 ND ND



Forecast



January 2003 1.00 5.33 ND ND


March 2003 1.00 5.17 ND ND

April 2003 1.01 5.15 ND ND

May 2003 1.08 5.24 ND ND

June 2003 1.19 5.24 ND ND

July 2003 1.17 5.53 ND ND

August 2003 1.21 5.76 ND ND


October 2003 1.14 5.63 ND ND



January 2004 1.17 5.51 ND ND


March 2004 1.28 5.86 ND ND

April 2004 1.19 5.92 ND ND

May 2004 1.24 6.03 ND ND

June 2004 1.18 6.09 ND ND

July 2004 1.09 6.00 ND ND

August 2004 1.18 5.87 ND ND


October 2004 1.31 6.02 ND ND



January 2005 1.20 6.20 ND ND


March 2005 1.33 6.10 ND ND

April 2005 1.26 6.23 ND ND

May 2005 1.29 6.18 ND ND

June 2005 1.27 6.25 ND ND

July 2005 1.39 6.24 ND ND

August 2005 1.26 6.31 ND ND


October 2005 1.34 6.21 ND ND



Forecast



January 2006 1.17 5.87 ND ND


March 2006 1.12 6.01 ND ND

April 2006 1.12 5.87 ND ND

May 2006 1.09 5.78 ND ND

June 2006 1.07 5.68 ND ND

July 2006 0.97 5.55 ND ND

August 2006 1.04 5.55 ND ND


October 2006 0.94 5.56 ND ND



January 2007 0.87 5.59 ND ND


March 2007 0.82 5.33 ND ND

April 2007 0.91 5.17 ND ND

May 2007 0.86 5.16 ND ND

June 2007 0.79 5.01 ND ND

July 2007 0.80 5.01 ND ND

August 2007 0.70 4.81 ND ND


October 2007 0.72 4.43 ND ND



January 2008 0.60 4.35 ND ND


March 2008 0.51 4.36 ND ND

April 2008 0.53 4.34 ND ND

May 2008 ND ND 0.52 4.39

June 2008 ND ND 0.51 4.50

July 2008 ND ND ND 4.50

August 2008 ND ND ND 4.47

September 2008 ND ND ND 4.40

2008:Q3 ND ND 0.49 ND



Forecast

2008:Q4 ND ND 0.48 4.40

2009:Q1 ND ND 0.49 4.40

2009:Q2 ND ND 0.52 4.43

2009:Q3 ND ND 0.55 4.51

2009:Q4 ND ND 0.58 4.64

Bottom-right panelSingle-family Housing Starts

Millions of units, annual rate

Period Starts Forecast

1999:Q1 1.34 ND

1999:Q2 1.27 ND

1999:Q3 1.29 ND

1999:Q4 1.34 ND

2000:Q1 1.28 ND

2000:Q2 1.24 ND

2000:Q3 1.19 ND

2000:Q4 1.22 ND

2001:Q1 1.26 ND

2001:Q2 1.30 ND

2001:Q3 1.28 ND

2001:Q4 1.26 ND

2002:Q1 1.36 ND

2002:Q2 1.34 ND

2002:Q3 1.34 ND

2002:Q4 1.41 ND

2003:Q1 1.41 ND

2003:Q2 1.43 ND

2003:Q3 1.53 ND

2003:Q4 1.66 ND

2004:Q1 1.56 ND

2004:Q2 1.61 ND

2004:Q3 1.64 ND

2004:Q4 1.61 ND

2005:Q1 1.71 ND

2005:Q2 1.70 ND

Period Starts Forecast

2005:Q3 1.75 ND

2005:Q4 1.73 ND

2006:Q1 1.74 ND

2006:Q2 1.51 ND

2006:Q3 1.39 ND

2006:Q4 1.25 ND

2007:Q1 1.16 ND

2007:Q2 1.16 ND

2007:Q3 0.99 ND

2007:Q4 0.83 ND

2008:Q1 0.73 ND

2008:Q2 ND 0.66

2008:Q3 ND 0.58

2008:Q4 ND 0.51

2009:Q1 ND 0.52

2009:Q2 ND 0.55

2009:Q3 ND 0.58

2009:Q4 ND 0.61

Exhibit 9Consumption and Investment

Top-left panelFactors Affecting PCE Forecast

Tax rebates push up the third quarter and create a pothole in the fourth quarterHigher oil prices sap household purchasing powerHit to household wealth from falling home pricesRestraining effects of financial turmoil and pessimistic consumer sentiment.

Top-right panelReal PCE

Percent change, Q4/Q4

Period Real PCE Forecast

2005 2.77 ND

2006 3.36 ND

2007 2.55 ND

2008 ND 0.49

2009 ND 1.52

Middle-left panelFactors Affecting E&S Forecast

High-tech investmentCautious comments from computer manufacturers.Slowing outlays by telecom service providers

Other investmentAccelerator effectsTight lending standardsGloomy business sentiment

Middle-right panelE&S Spending Excluding Transportation


PeriodHigh-tech

(contribution*)Other

(contribution*)High-techForecast

OtherForecast

2005 4.47 4.08 ND ND

2006 2.67 -0.26 ND ND

2007 6.07 0.67 ND ND

2008 ND ND 1.55 -2.16

2009 ND ND 1.85 -1.04

* Contribution to E&S growth rate. Return to table

Bottom-left panelFactors Affecting NRS Forecast

Drilling and miningBottlenecks: shortages of skilled labor and suppliesRig count upEscalating energy prices

BuildingsVacancy rates moving upSales and prices of existing properties saggingFinancing conditions tight

Bottom-right panelNonresidential Structures


PeriodDrilling and Mining

(contribution*)Buildings

(contribution*)Drilling and Mining

ForecastBuildingsForecast

2005 0.70 -0.97 ND ND

2006 4.31 8.06 ND ND

2007 4.48 10.87 ND ND

2008 ND ND 2.43 -0.45

2009 ND ND 4.68 -4.22

* Contribution to NRS growth rate. Return to table

Exhibit 10Aggregate Supply and the Labor Market

Top panelStaff Assumptions

(Percent change)

2007 2008 2009

1. Potential output 2.5 2.5 2.5

2. (April GB) (2.4) (2.3) (2.2)

3. Structural productivity 2.1 2.0 2.0

4. (April GB) (2.1) (1.9) (1.8)

5. Trend hours 1.0 0.9 0.9

6. (April GB) (0.9) (0.8) (0.8)

7. Technical factors -0.5 -0.4 -0.4

Middle-left panelLabor Productivity: Nonfarm Business Sector

Four-quarter percent change

Period Actual Simulation

2006:Q1 1.40 ND

2006:Q2 1.61 ND

2006:Q3 0.10 ND

2006:Q4 0.85 0.85

2007:Q1 0.62 0.67

2007:Q2 0.95 1.42

2007:Q3 2.85 2.93

2007:Q4 2.94 2.59

2008:Q1 3.33 2.59

2008:Q2 3.23 1.96

Kalman Filter Estimates

Apr. GB 2.1

Jun. GB 2.3

Middle-right panelLabor Force Participation Rate

Percent

Period Actual Simulation

2006:Q1 65.98 ND

2006:Q2 66.09 66.07

2006:Q3 66.11 66.05

2006:Q4 66.22 66.02

2007:Q1 66.16 66.00

2007:Q2 65.95 65.98

2007:Q3 65.91 65.95

2007:Q4 65.91 65.91

2008:Q1 66.00 65.86

2008:Q2 66.08 65.81

Note: Adjusted for changes in population controls.

Bottom-left panelPayroll Employment

Average monthly changeThousands

Period Payroll Employment TrendPayroll Employment

ForecastTrend

Forecast

2000:Q1 260.33 145.13 ND ND

2000:Q2 258.56 145.99 ND ND

2000:Q3 83.33 146.27 ND ND

2000:Q4 90.44 146.57 ND ND

2001:Q1 61.22 144.52 ND ND

2001:Q2 -117.56 144.13 ND ND

2001:Q3 -137.67 143.68 ND ND

2001:Q4 -265.00 142.82 ND ND

2002:Q1 -151.33 121.55 ND ND

2002:Q2 -46.56 121.42 ND ND

2002:Q3 -32.78 121.32 ND ND

2002:Q4 12.44 121.36 ND ND

2003:Q1 -64.78 114.06 ND ND

2003:Q2 -82.56 113.85 ND ND

2003:Q3 9.33 113.87 ND ND

2003:Q4 103.67 114.14 ND ND

2004:Q1 120.00 106.84 ND ND

2004:Q2 239.78 107.43 ND ND

2004:Q3 126.44 107.74 ND ND

Period Payroll Employment TrendPayroll Employment

ForecastTrend

Forecast

2004:Q4 198.00 108.23 ND ND

2005:Q1 140.33 114.67 ND ND

2005:Q2 228.67 115.27 ND ND

2005:Q3 259.89 115.94 ND ND

2005:Q4 180.22 116.41 ND ND

2006:Q1 240.67 112.06 ND ND

2006:Q2 152.22 112.44 ND ND

2006:Q3 171.44 112.86 ND ND

2006:Q4 144.78 113.22 ND ND

2007:Q1 131.67 117.07 ND ND

2007:Q2 105.33 117.34 ND ND

2007:Q3 86.22 117.56 ND ND

2007:Q4 90.78 117.80 ND ND

2008:Q1 -37.78 112.04 ND ND

2008:Q2 ND ND -49.89 111.92

2008:Q3 ND ND -32.56 111.81

2008:Q4 ND ND -39.75 111.65

2009:Q1 ND ND 65.21 107.75

2009:Q2 ND ND 98.04 107.98

2009:Q3 ND ND 103.89 108.27

2009:Q4 ND ND 135.74 108.56

Bottom-right panelUnemployment Rate

Percent

Period Actual Forecast

2000:Q1 4.05 ND

2000:Q2 3.95 ND

2000:Q3 4.03 ND

2000:Q4 3.92 ND

2001:Q1 4.23 ND

2001:Q2 4.41 ND

2001:Q3 4.82 ND

2001:Q4 5.54 ND

2002:Q1 5.70 ND

2002:Q2 5.84 ND

Period Actual Forecast

2002:Q3 5.73 ND

2002:Q4 5.85 ND

2003:Q1 5.87 ND

2003:Q2 6.15 ND

2003:Q3 6.10 ND

2003:Q4 5.82 ND

2004:Q1 5.68 ND

2004:Q2 5.59 ND

2004:Q3 5.44 ND

2004:Q4 5.39 ND

2005:Q1 5.27 ND

2005:Q2 5.11 ND

2005:Q3 4.98 ND

2005:Q4 4.94 ND

2006:Q1 4.71 ND

2006:Q2 4.67 ND

2006:Q3 4.66 ND

2006:Q4 4.44 ND

2007:Q1 4.50 ND

2007:Q2 4.51 ND

2007:Q3 4.68 ND

2007:Q4 4.80 ND

2008:Q1 4.94 ND

2008:Q2 ND 5.26

2008:Q3 ND 5.50

2008:Q4 ND 5.61

2009:Q1 ND 5.66

2009:Q2 ND 5.67

2009:Q3 ND 5.69

2009:Q4 ND 5.64

Apr. 5.0

May 5.5

Jun. 5.3

Exhibit 11Inflation

p

Top-left panelRecent Price Data

(Percent change)

2008

Q1 Q2 April May

1. Total PCE 3.6 4.1 0.2 0.5

2. (April GB) (3.5) (4.3) (0.3) (0.6)

3. Core PCE 2.2 2.0 0.1 0.2

4. (April GB) (2.1) (2.3) (0.2) (0.2)

Note: Quarterly figures are at annual rates.

Top-right panelTotal and Core PCE Prices

12-month percent change

Period Total PCE Core PCETotal PCEForecast

Core PCEForecast

January 2004 2.11 1.65 ND ND


March 2004 1.90 1.89 ND ND

April 2004 2.35 2.05 ND ND

May 2004 2.93 2.09 ND ND

June 2004 3.11 2.21 ND ND

July 2004 2.92 2.12 ND ND

August 2004 2.66 2.06 ND ND


October 2004 2.99 2.15 ND ND



January 2005 2.76 2.29 ND ND


March 2005 2.80 2.27 ND ND

April 2005 2.98 2.13 ND ND

May 2005 2.59 2.19 ND ND

June 2005 2.35 2.07 ND ND

July 2005 2.72 2.08 ND ND

August 2005 3.06 2.11 ND ND


October 2005 3.60 2.18 ND ND

e p e e

Period Total PCE Core PCETotal PCEForecast

Core PCEForecast



January 2006 3.26 2.06 ND ND


March 2006 2.89 2.04 ND ND

April 2006 3.00 2.20 ND ND

May 2006 3.33 2.17 ND ND

June 2006 3.50 2.34 ND ND

July 2006 3.38 2.32 ND ND

August 2006 3.22 2.45 ND ND


October 2006 1.51 2.38 ND ND



January 2007 2.14 2.44 ND ND


March 2007 2.53 2.26 ND ND

April 2007 2.32 2.09 ND ND

May 2007 2.37 2.01 ND ND

June 2007 2.31 1.91 ND ND

July 2007 2.12 1.95 ND ND

August 2007 1.85 1.88 ND ND


October 2007 2.97 1.98 ND ND



January 2008 3.51 1.99 ND ND


March 2008 3.22 2.06 ND ND

April 2008 ND ND 3.16 2.09

May 2008 ND ND 3.15 2.14

June 2008 ND ND 3.62 2.19

July 2008 ND ND 4.11 2.25

August 2008 ND ND 4.48 2.29

September 2008 ND ND 4.46 2.24

Middle-left panel

Gasoline and Natural Gas Prices

PeriodRetail Gasoline

($/Gallon, ratio scale)Natural Gas spot

($/Million BTUs, ratio scale)

12 January 2004 1.56 4.68

19 January 2004 1.60 4.75

26 January 2004 1.62 4.73

2 February 2004 1.62 4.65

9 February 2004 1.64 4.72

16 February 2004 1.65 4.75

23 February 2004 1.69 4.73

1 March 2004 1.72 4.91

8 March 2004 1.74 4.86

15 March 2004 1.72 4.86

22 March 2004 1.74 4.79

29 March 2004 1.76 4.69

5 April 2004 1.78 4.73

12 April 2004 1.79 4.74

19 April 2004 1.81 4.77

26 April 2004 1.81 4.81

3 May 2004 1.84 4.86

10 May 2004 1.94 4.93

17 May 2004 2.02 5.06

24 May 2004 2.06 5.10

31 May 2004 2.05 4.96

7 June 2004 2.03 4.90

14 June 2004 1.99 4.80

21 June 2004 1.94 4.80

28 June 2004 1.92 4.77

5 July 2004 1.90 4.69

12 July 2004 1.92 4.75

19 July 2004 1.93 4.83

26 July 2004 1.91 4.86

2 August 2004 1.89 4.97

9 August 2004 1.88 5.20

16 August 2004 1.88 5.18

23 August 2004 1.88 5.14

30 August 2004 1.87 5.15

6 September 2004 1.85 5.17




13 September 2004 1.85 5.22

20 September 2004 1.87 5.21

27 September 2004 1.92 5.29

4 October 2004 1.94 5.28

11 October 2004 1.99 5.24

18 October 2004 2.04 5.26

25 October 2004 2.03 5.56

1 November 2004 2.03 5.79

8 November 2004 2.00 5.69

15 November 2004 1.97 5.48

22 November 2004 1.95 5.48

29 November 2004 1.95 5.57

6 December 2004 1.91 5.32

13 December 2004 1.85 5.33

20 December 2004 1.82 5.39

27 December 2004 1.79 5.40

3 January 2005 1.78 5.26

10 January 2005 1.79 5.32

17 January 2005 1.82 5.35

24 January 2005 1.85 5.35

31 January 2005 1.91 5.41

7 February 2005 1.91 5.42

14 February 2005 1.90 5.42

21 February 2005 1.91 5.42

28 February 2005 1.93 5.60

7 March 2005 2.00 5.71

14 March 2005 2.06 5.70

21 March 2005 2.11 5.93

28 March 2005 2.15 5.95

4 April 2005 2.22 6.05

11 April 2005 2.28 6.15

18 April 2005 2.24 6.00

25 April 2005 2.24 6.19

2 May 2005 2.24 6.07

9 May 2005 2.19 6.11

16 May 2005 2.16 6.23




23 May 2005 2.13 6.33

30 May 2005 2.10 6.43

6 June 2005 2.12 6.55

13 June 2005 2.13 6.57

20 June 2005 2.16 6.70

27 June 2005 2.22 6.67

4 July 2005 2.23 6.99

11 July 2005 2.33 7.23

18 July 2005 2.32 7.06

25 July 2005 2.29 7.05

1 August 2005 2.29 7.17

8 August 2005 2.37 7.28

15 August 2005 2.55 7.39

22 August 2005 2.61 7.45

29 August 2005 2.61 7.68

5 September 2005 3.07 7.86

12 September 2005 2.96 7.83

19 September 2005 2.79 7.68

26 September 2005 2.80 7.83

3 October 2005 2.93 7.63

10 October 2005 2.85 7.47

17 October 2005 2.73 7.52

24 October 2005 2.60 7.52

31 October 2005 2.48 7.46

7 November 2005 2.38 7.45

14 November 2005 2.30 7.44

21 November 2005 2.20 7.63

28 November 2005 2.15 7.70

5 December 2005 2.15 7.32

12 December 2005 2.19 7.30

19 December 2005 2.21 7.45

26 December 2005 2.20 7.68

2 January 2006 2.24 7.83

9 January 2006 2.33 8.31

16 January 2006 2.32 8.55

23 January 2006 2.34 8.87




30 January 2006 2.36 8.70

6 February 2006 2.34 8.39

13 February 2006 2.28 8.37

20 February 2006 2.24 8.06

27 February 2006 2.25 7.88

6 March 2006 2.33 7.81

13 March 2006 2.37 8.02

20 March 2006 2.50 7.96

27 March 2006 2.50 8.02

3 April 2006 2.59 7.79

10 April 2006 2.68 7.85

17 April 2006 2.78 7.95

24 April 2006 2.91 8.01

1 May 2006 2.92 8.38

8 May 2006 2.91 8.40

15 May 2006 2.95 8.51

22 May 2006 2.89 8.44

29 May 2006 2.87 8.33

5 June 2006 2.89 8.56

12 June 2006 2.91 8.45

19 June 2006 2.87 8.44

26 June 2006 2.87 8.33

3 July 2006 2.93 8.54

10 July 2006 2.97 8.63

17 July 2006 2.99 8.87

24 July 2006 3.00 8.96

31 July 2006 3.00 8.72

7 August 2006 3.04 8.59

14 August 2006 3.00 8.48

21 August 2006 2.92 8.36

28 August 2006 2.85 8.44

4 September 2006 2.73 8.37

11 September 2006 2.62 8.36

18 September 2006 2.50 8.28

25 September 2006 2.38 8.07

2 October 2006 2.31 7.86




9 October 2006 2.26 7.76

16 October 2006 2.23 7.71

23 October 2006 2.21 7.65

30 October 2006 2.22 7.35

6 November 2006 2.20 7.34

13 November 2006 2.23 7.46

20 November 2006 2.24 7.52

27 November 2006 2.25 7.52

4 December 2006 2.30 7.23

11 December 2006 2.29 7.15

18 December 2006 2.32 7.11

25 December 2006 2.34 7.02

1 January 2007 2.33 6.99

8 January 2007 2.31 7.13

15 January 2007 2.23 7.44

22 January 2007 2.17 7.46

29 January 2007 2.17 7.41

5 February 2007 2.19 7.50

12 February 2007 2.24 7.73

19 February 2007 2.30 7.85

26 February 2007 2.38 7.79

5 March 2007 2.51 7.94

12 March 2007 2.56 7.94

19 March 2007 2.58 7.86

26 March 2007 2.61 7.94

2 April 2007 2.71 8.05

9 April 2007 2.80 8.04

16 April 2007 2.88 8.16

23 April 2007 2.87 8.17

30 April 2007 2.97 8.35

7 May 2007 3.05 8.33

14 May 2007 3.10 8.38

21 May 2007 3.22 8.33

28 May 2007 3.21 8.35

4 June 2007 3.16 8.37

11 June 2007 3.08 8.22




18 June 2007 3.01 8.33

25 June 2007 2.98 8.35

2 July 2007 2.96 8.33

9 July 2007 2.98 8.19

16 July 2007 3.05 8.02

23 July 2007 2.96 8.06

30 July 2007 2.88 8.14

6 August 2007 2.84 8.18

13 August 2007 2.77 8.20

20 August 2007 2.79 8.05

27 August 2007 2.75 7.94

3 September 2007 2.80 7.99

10 September 2007 2.82 8.08

17 September 2007 2.79 8.06

24 September 2007 2.81 8.02

1 October 2007 2.79 7.98

8 October 2007 2.77 7.94

15 October 2007 2.76 7.96

22 October 2007 2.82 8.18

29 October 2007 2.87 8.27

5 November 2007 3.01 8.33

12 November 2007 3.11 8.30

19 November 2007 3.10 8.31

26 November 2007 3.10 8.37

3 December 2007 3.06 8.36

10 December 2007 3.00 8.38

17 December 2007 3.00 8.49

24 December 2007 2.98 8.59

31 December 2007 3.05 8.72

7 January 2008 3.11 8.53

14 January 2008 3.07 8.48

21 January 2008 3.02 8.58

28 January 2008 2.98 8.35

4 February 2008 2.98 8.39

11 February 2008 2.96 8.58

18 February 2008 3.04 8.78




25 February 2008 3.13 9.15

3 March 2008 3.16 9.77

10 March 2008 3.23 10.39

17 March 2008 3.28 10.82

24 March 2008 3.26 10.85

31 March 2008 3.29 10.84

7 April 2008 3.33 10.64

14 April 2008 3.39 10.61

21 April 2008 3.51 10.36

28 April 2008 3.60 10.56

5 May 2008 3.61 10.42

12 May 2008 3.72 10.46

19 May 2008 3.79 10.59

26 May 2008 3.94 11.76

2 June 2008 3.98 11.85

9 June 2008 4.04 12.30

16 June 2008 4.08 12.86

23 June 2008 4.08 13.04

Middle-right panelSpot and Futures Prices for Food Commodities

Index, 1987:Q4 = 100, ratio scale

Period LivestockLivestockApril GB

LivestockForecast

CropsCrops

April GBCrops

Forecast

2004:Q1 117.96 ND ND 138.19 ND ND

2004:Q2 134.78 ND ND 145.83 ND ND

2004:Q3 130.28 ND ND 121.40 ND ND

2004:Q4 129.29 ND ND 104.68 ND ND

2005:Q1 131.31 ND ND 100.19 ND ND

2005:Q2 128.96 ND ND 105.38 ND ND

2005:Q3 120.68 ND ND 111.05 ND ND

2005:Q4 126.99 ND ND 105.22 ND ND

2006:Q1 124.69 ND ND 109.25 ND ND

2006:Q2 113.39 ND ND 112.01 ND ND

2006:Q3 116.53 ND ND 114.79 ND ND

2006:Q4 123.43 ND ND 142.38 ND ND

2007:Q1 128.56 ND ND 159.92 ND ND

Period LivestockLivestockApril GB

LivestockForecast

CropsCrops

April GBCrops

Forecast

2007:Q2 140.52 ND ND 153.56 ND ND

2007:Q3 147.11 ND ND 164.62 ND ND

2007:Q4 144.06 ND ND 192.44 ND ND

2008:Q1 138.69 138.57 ND 254.55 254.89 ND

2008:Q2 ND 140.46 143.14 ND 258.13 270.15

2008:Q3 ND 149.05 157.97 ND 261.22 304.85

2008:Q4 ND 153.62 167.07 ND 261.95 312.67

2009:Q1 ND 155.66 170.64 ND 260.34 312.97

2009:Q2 ND 155.97 173.18 ND ND 314.07

2009:Q3 ND ND 172.70 ND ND 313.23

2009:Q4 ND ND 173.92 ND ND 299.66

Bottom-left panelPCE Energy Prices


Period PCE Energy Prices April GB Forecast

2004:Q1 3.53 ND ND

2004:Q2 13.08 ND ND

2004:Q3 11.02 ND ND

2004:Q4 18.27 ND ND

2005:Q1 11.48 ND ND

2005:Q2 11.51 ND ND

2005:Q3 23.83 ND ND

2005:Q4 21.12 ND ND

2006:Q1 20.29 ND ND

2006:Q2 22.09 ND ND

2006:Q3 10.23 ND ND

2006:Q4 -4.03 ND ND

2007:Q1 0.49 ND ND

2007:Q2 4.00 ND ND

2007:Q3 0.94 ND ND

2007:Q4 19.58 ND ND

2008:Q1 20.22 20.25 ND

2008:Q2 ND 17.02 15.17

2008:Q3 ND 22.99 32.15

2008:Q4 ND 16.17 28.04

Period PCE Energy Prices April GB Forecast

2009:Q1 ND 11.11 23.77

2009:Q2 ND 2.38 16.49

2009:Q3 ND -1.31 3.18

2009:Q4 ND -1.40 0.80

Bottom-right panelPCE Food Prices


Period PCE Food Prices April GB Forecast

2004:Q1 2.94 ND ND

2004:Q2 3.31 ND ND

2004:Q3 3.26 ND ND

2004:Q4 2.87 ND ND

2005:Q1 2.42 ND ND

2005:Q2 2.40 ND ND

2005:Q3 2.15 ND ND

2005:Q4 2.23 ND ND

2006:Q1 2.57 ND ND

2006:Q2 1.99 ND ND

2006:Q3 2.39 ND ND

2006:Q4 2.28 ND ND

2007:Q1 2.88 ND ND

2007:Q2 3.66 ND ND

2007:Q3 4.09 ND ND

2007:Q4 4.53 ND ND

2008:Q1 4.56 4.54 ND

2008:Q2 ND 3.98 5.03

2008:Q3 ND 3.35 4.57

2008:Q4 ND 3.05 4.29

2009:Q1 ND 2.44 3.69

2009:Q2 ND 2.37 2.64

2009:Q3 ND 2.30 2.45

2009:Q4 ND 2.16 2.34

Exhibit 12Indicators of Input Costs

Top-left panelIntermediate Materials Prices

PeriodCore PPI

(12-month percent change)ISM prices paid*(Diffusion index)

January 2002 -1.82 34.67

February 2002 -1.97 38.33

March 2002 -1.82 44.67

April 2002 -1.46 51.67

May 2002 -1.46 59.50

June 2002 -1.02 64.67

July 2002 -0.37 66.33

August 2002 0.22 65.67

September 2002 0.52 65.17

October 2002 0.96 62.50

November 2002 1.26 59.17

December 2002 1.49 55.83

January 2003 1.86 55.17

February 2003 2.60 59.33

March 2003 2.74 64.33

April 2003 2.22 66.33

May 2003 2.29 61.67

June 2003 1.99 57.17

July 2003 1.69 53.67

August 2003 1.62 54.17

September 2003 1.61 54.00

October 2003 1.76 55.83

November 2003 1.83 59.50

December 2003 2.12 62.83

January 2004 2.41 68.50

February 2004 2.61 74.33

March 2004 3.03 81.00

April 2004 4.48 85.17

May 2004 5.20 86.67

June 2004 5.64 85.00

July 2004 6.15 81.33

August 2004 7.15 79.83

September 2004 7.79 78.17

October 2004 7.99 78.67

PeriodCore PPI


November 2004 8.19 76.17

December 2004 8.32 74.83

January 2005 8.48 71.67

February 2005 8.05 68.83

March 2005 7.63 69.17

April 2005 6.43 69.83

May 2005 5.35 67.33

June 2005 4.86 59.83

July 2005 4.56 52.33

August 2005 3.37 53.83

September 2005 3.61 63.00

October 2005 4.66 74.83

November 2005 4.71 78.67

December 2005 4.77 73.67

January 2006 4.86 67.33

February 2006 4.70 63.50

March 2006 4.68 64.67

April 2006 5.26 66.83

May 2006 6.64 71.67

June 2006 7.44 75.00

July 2006 7.88 77.33

August 2006 8.41 76.00

September 2006 7.23 70.83

October 2006 5.67 60.33

November 2006 4.82 53.83

December 2006 4.49 49.33

January 2007 3.63 51.33

February 2007 3.24 53.17

March 2007 3.23 59.17

April 2007 3.52 65.83

May 2007 2.99 69.83

June 2007 2.61 70.67

July 2007 2.42 68.00

August 2007 1.56 65.33

September 2007 1.69 62.33

October 2007 2.11 61.67

PeriodCore PPI


November 2007 3.33 63.17

December 2007 3.33 66.17

January 2008 4.23 70.50

February 2008 4.83 73.17

March 2008 5.48 78.33

April 2008 5.84 81.17

May 2008 7.35 85.00

* Three-month moving average; manufacturing firms. Return to table

Top-right panelCore Nonfuel Import Prices


Period Core Nonfuel Import Prices April GB Forecast

2002:Q1 -2.71 ND ND

2002:Q2 -1.95 ND ND

2002:Q3 -0.67 ND ND

2002:Q4 0.11 ND ND

2003:Q1 1.19 ND ND

2003:Q2 1.22 ND ND

2003:Q3 1.16 ND ND

2003:Q4 1.61 ND ND

2004:Q1 2.36 ND ND

2004:Q2 3.16 ND ND

2004:Q3 3.40 ND ND

2004:Q4 3.58 ND ND

2005:Q1 3.49 ND ND

2005:Q2 2.87 ND ND

2005:Q3 2.24 ND ND

2005:Q4 2.22 ND ND

2006:Q1 1.29 ND ND

2006:Q2 1.69 ND ND

2006:Q3 2.75 ND ND

2006:Q4 2.40 ND ND

2007:Q1 2.77 ND ND

2007:Q2 2.85 ND ND

2007:Q3 2.65 ND ND

2007:Q4 3.30 3.30 ND

Period Core Nonfuel Import Prices April GB Forecast

2008:Q1 4.69 4.50 ND

2008:Q2 ND 5.11 6.40

2008:Q3 ND 5.09 6.28

2008:Q4 ND 4.60 5.78

2009:Q1 ND 3.10 4.10

2009:Q2 ND 1.93 1.89

2009:Q3 ND 1.47 1.58

2009:Q4 ND 1.27 1.40

Middle-left panelTransportation Costs

12-month percent change

Period Rail transport Trucking

January 2002 2.21 0.73

February 2002 2.41 0.65

March 2002 2.21 0.57

April 2002 2.51 0.81

May 2002 2.60 0.89

June 2002 2.50 0.97

July 2002 2.59 0.89

August 2002 2.30 1.21

September 2002 1.04 1.13

October 2002 0.95 1.53

November 2002 1.32 2.02

December 2002 1.23 2.27

January 2003 1.04 2.67

February 2003 1.13 2.83

March 2003 1.88 3.23

April 2003 2.63 2.98

May 2003 2.07 2.81

June 2003 2.44 2.57

July 2003 2.25 3.13

August 2003 2.35 2.79

September 2003 2.44 2.95

October 2003 2.43 2.54

November 2003 2.15 2.38

December 2003 2.33 2.38


January 2004 2.98 2.30

February 2004 2.98 2.69

March 2004 2.95 2.49

April 2004 2.47 2.79

May 2004 3.31 3.42

June 2004 3.11 4.13

July 2004 3.75 3.96

August 2004 4.03 4.02

September 2004 4.94 4.58

October 2004 5.67 5.16

November 2004 6.40 5.60

December 2004 7.30 5.50

January 2005 7.06 5.58

February 2005 6.96 4.95

March 2005 7.53 5.53

April 2005 8.32 5.91

May 2005 10.69 5.67

June 2005 10.83 5.53

July 2005 10.24 5.51

August 2005 11.19 5.50

September 2005 11.42 5.93

October 2005 12.98 6.76

November 2005 14.26 5.97

December 2005 13.18 5.40

January 2006 11.50 5.00

February 2006 10.81 4.81

March 2006 10.93 4.49

April 2006 10.07 4.37

May 2006 8.53 5.00

June 2006 10.02 4.69

July 2006 11.21 4.49

August 2006 10.22 4.84

September 2006 9.15 3.52

October 2006 6.74 1.52

November 2006 2.86 1.43

December 2006 1.80 2.07

January 2007 3.18 2.25


February 2007 4.27 2.07

March 2007 1.88 2.06

April 2007 2.55 2.40

May 2007 2.37 1.67

June 2007 2.69 1.49

July 2007 1.44 1.14

August 2007 2.52 0.70

September 2007 3.30 0.79

October 2007 3.80 2.02

November 2007 7.09 3.17

December 2007 9.23 3.79

January 2008 11.76 4.57

February 2008 11.33 4.67

March 2008 12.92 5.09

April 2008 12.58 6.17

May 2008 13.25 7.80

Note: Producer price indexes.

Middle-right panelDirect Effects of Commodity and Import Prices on Core Inflation

Percentage points

Period Energy Imports and Other CommoditiesEnergy

ForecastImports and Other Commodities

Forecast

2005 0.25 0.05 ND ND

2006 0.20 0.05 ND ND

2007 0.10 0.10 ND ND

2008 ND ND 0.30 0.35

2009 ND ND 0.25 0.00

Bottom-left panelLabor Compensation

Percent change from year earlier

PeriodNFB

CompensationPer Hour

EmploymentCost Index

AverageHourly

Earnings

NFBCompensation

Per HourForecast

EmploymentCost IndexForecast

AverageHourly

EarningsForecast

2002:Q1 3.50 3.80 2.97 ND ND ND

2002:Q2 4.00 4.00 2.67 ND ND ND

2002:Q3 3.90 3.50 2.90 ND ND ND

PeriodNFB

CompensationPer Hour

EmploymentCost Index

AverageHourly

Earnings

NFBCompensation

Per HourForecast

EmploymentCost IndexForecast

AverageHourly

EarningsForecast

2002:Q4 3.20 3.10 3.06 ND ND ND

2003:Q1 3.00 3.60 3.22 ND ND ND

2003:Q2 3.50 3.50 2.96 ND ND ND

2003:Q3 4.40 3.90 2.60 ND ND ND

2003:Q4 5.30 4.00 1.98 ND ND ND

2004:Q1 3.80 3.80 1.79 ND ND ND

2004:Q2 3.40 3.90 2.02 ND ND ND

2004:Q3 3.40 3.80 2.18 ND ND ND

2004:Q4 3.90 3.80 2.50 ND ND ND

2005:Q1 4.80 3.50 2.57 ND ND ND

2005:Q2 3.90 3.10 2.64 ND ND ND

2005:Q3 4.00 2.90 2.71 ND ND ND

2005:Q4 3.40 2.90 3.03 ND ND ND

2006:Q1 4.20 2.60 3.45 ND ND ND

2006:Q2 3.80 2.80 3.93 ND ND ND

2006:Q3 2.70 3.00 4.06 ND ND ND

2006:Q4 5.00 3.20 4.14 ND ND ND

2007:Q1 4.90 3.20 4.16 ND ND ND

2007:Q2 5.30 3.10 4.00 ND ND ND

2007:Q3 5.80 3.10 4.06 ND ND ND

2007:Q4 4.38 3.00 3.76 ND ND ND

2008:Q1 4.01 3.20 3.69 ND ND ND

2008:Q2 ND ND ND 4.66 3.23 3.43

2008:Q3 ND ND ND 4.81 3.34 3.34

2008:Q4 ND ND ND 4.14 3.36 3.51

2009:Q1 ND ND ND 3.95 3.45 3.43

2009:Q2 ND ND ND 4.01 3.47 3.53

2009:Q3 ND ND ND 4.05 3.44 3.47

2009:Q4 ND ND ND 4.11 3.42 3.42

Bottom-right panelUnit Labor Costs*


Actual Trend

2006 4.2 2.9

Actual Trend

2007 1.4 2.3

2008 2.3 2.1

2009 2.0 2.1

* Nonfarm business sector. Return to text

Exhibit 13Inflation Projection

Top-left panelShort-Run Inflation Expectations

Reuters/Michigan Survey*

Period Percent

January 2004 2.7

February 2004 2.6

March 2004 2.9

April 2004 3.2

May 2004 3.3

June 2004 3.3

July 2004 3.0

August 2004 2.8

September 2004 2.8

October 2004 3.1

November 2004 2.8

December 2004 3.0

January 2005 2.9

February 2005 2.9

March 2005 3.2

April 2005 3.3

May 2005 3.2

June 2005 3.2

July 2005 3.0

August 2005 3.1

September 2005 4.3

October 2005 4.6

November 2005 3.3

December 2005 3.1

January 2006 3.0

p

p

Period Percent

February 2006 3.0

March 2006 3.0

April 2006 3.3

May 2006 4.0

June 2006 3.3

July 2006 3.2

August 2006 3.8

September 2006 3.1

October 2006 3.1

November 2006 3.0

December 2006 2.9

January 2007 3.0

February 2007 3.0

March 2007 3.0

April 2007 3.3

May 2007 3.3

June 2007 3.4

July 2007 3.4

August 2007 3.2

September 2007 3.1

October 2007 3.1

November 2007 3.4

December 2007 3.4

January 2008 3.4

February 2008 3.6

March 2008 4.3

April 2008 4.8

May 2008 5.2

June 2008 5.1

* Next 12 months. Return to table

Survey of Professional Forecasters*

Period Percent

2004:Q1 1.63

2004:Q2 2.13

2004:Q3 2.30

2004:Q4 2.26

Period Percent

2005:Q1 2.25

2005:Q2 2.37

2005:Q3 2.44

2005:Q4 2.39

2006:Q1 2.43

2006:Q2 2.39

2006:Q3 2.63

2006:Q4 2.62

2007:Q1 2.46

2007:Q2 2.43

2007:Q3 2.23

2007:Q4 2.44

2008:Q1 2.38

2008:Q2 2.67

* Next 12 months. Return to table

Top-right panelLong-Run Inflation Expectations

Reuters/Michigan Survey*

Period Percent

January 2004 2.8

February 2004 2.9

March 2004 2.9

April 2004 2.7

May 2004 2.8

June 2004 2.9

July 2004 2.8

August 2004 2.7

September 2004 2.8

October 2004 2.8

November 2004 2.7

December 2004 2.8

January 2005 2.7

February 2005 2.8

March 2005 2.9

April 2005 3.0

May 2005 2.9

Period Percent

June 2005 2.8

July 2005 2.9

August 2005 2.8

September 2005 3.1

October 2005 3.2

November 2005 3.0

December 2005 3.1

January 2006 2.9

February 2006 2.9

March 2006 2.9

April 2006 3.1

May 2006 3.2

June 2006 2.9

July 2006 2.9

August 2006 3.2

September 2006 3.0

October 2006 3.1

November 2006 3.0

December 2006 3.0

January 2007 3.0

February 2007 2.9

March 2007 2.9

April 2007 3.1

May 2007 3.1

June 2007 2.9

July 2007 3.1

August 2007 2.9

September 2007 2.9

October 2007 2.8

November 2007 2.9

December 2007 3.1

January 2008 3.0

February 2008 3.0

March 2008 2.9

April 2008 3.2

May 2008 3.4

June 2008 3.4

* Five-to-ten years ahead. Return to table

Survey of Professional Forecasters**

Period Percent

2004:Q1 2.50

2004:Q2 2.50

2004:Q3 2.50

2004:Q4 2.50

2005:Q1 2.45

2005:Q2 2.50

2005:Q3 2.50

2005:Q4 2.50

2006:Q1 2.50

2006:Q2 2.50

2006:Q3 2.50

2006:Q4 2.50

2007:Q1 2.35

2007:Q2 2.40

2007:Q3 2.40

2007:Q4 2.40

2008:Q1 2.50

2008:Q2 2.50

** Next ten years. Return to table

TIPS inflation compensation*

Date Percent

2 January 2004 3.07

5 January 2004 3.10

6 January 2004 3.05

7 January 2004 3.03

8 January 2004 3.04

9 January 2004 2.96

12 January 2004 2.94

13 January 2004 2.94

14 January 2004 2.82

15 January 2004 2.77

16 January 2004 2.84

19 January 2004 ND

20 January 2004 2.85

Date Percent

21 January 2004 2.88

22 January 2004 2.85

23 January 2004 2.88

26 January 2004 2.90

27 January 2004 2.91

28 January 2004 2.90

29 January 2004 2.94

30 January 2004 2.89

2 February 2004 2.90






10 February 2004 2.89

11 February 2004 2.86

12 February 2004 2.88

13 February 2004 2.83

16 February 2004 ND

17 February 2004 2.81

18 February 2004 2.83

19 February 2004 2.79

20 February 2004 2.79

23 February 2004 2.78

24 February 2004 2.79

25 February 2004 2.82

26 February 2004 2.87

27 February 2004 2.84

1 March 2004 2.91

2 March 2004 2.94

3 March 2004 2.98

4 March 2004 2.97

5 March 2004 2.89

8 March 2004 2.87

9 March 2004 2.85

10 March 2004 2.82

11 March 2004 2.80

Date Percent

12 March 2004 2.79

15 March 2004 2.81

16 March 2004 2.81

17 March 2004 2.83

18 March 2004 2.84

19 March 2004 2.82

22 March 2004 2.79

23 March 2004 2.79

24 March 2004 2.82

25 March 2004 2.86

26 March 2004 2.92

29 March 2004 2.98

30 March 2004 2.98

31 March 2004 2.94

1 April 2004 2.98

2 April 2004 3.05

5 April 2004 3.08

6 April 2004 3.05

7 April 2004 2.99

8 April 2004 3.01

9 April 2004 ND

12 April 2004 3.05

13 April 2004 3.09

14 April 2004 3.09

15 April 2004 3.07

16 April 2004 3.10

19 April 2004 3.10

20 April 2004 3.06

21 April 2004 3.03

22 April 2004 2.97

23 April 2004 2.95

26 April 2004 2.99

27 April 2004 3.00

28 April 2004 2.94

29 April 2004 2.91

30 April 2004 2.93

3 May 2004 2.94

Date Percent

4 May 2004 2.98

5 May 2004 3.00

6 May 2004 3.00

7 May 2004 3.09

10 May 2004 3.13

11 May 2004 3.15

12 May 2004 3.22

13 May 2004 3.27

14 May 2004 3.23

17 May 2004 3.24

18 May 2004 3.28

19 May 2004 3.36

20 May 2004 3.34

21 May 2004 3.31

24 May 2004 3.30

25 May 2004 3.28

26 May 2004 3.24

27 May 2004 3.22

28 May 2004 3.23

31 May 2004 ND

1 June 2004 3.32

2 June 2004 3.28

3 June 2004 3.23

4 June 2004 3.24

7 June 2004 3.24

8 June 2004 3.18

9 June 2004 3.18

10 June 2004 3.16

11 June 2004 ND

14 June 2004 3.14

15 June 2004 3.01

16 June 2004 3.04

17 June 2004 3.03

18 June 2004 3.05

21 June 2004 3.03

22 June 2004 3.04

23 June 2004 3.03

Date Percent

24 June 2004 3.02

25 June 2004 3.02

28 June 2004 3.03

29 June 2004 3.03

30 June 2004 3.06

1 July 2004 3.10

2 July 2004 3.09

5 July 2004 ND

6 July 2004 3.05

7 July 2004 3.03

8 July 2004 2.98

9 July 2004 2.98

12 July 2004 2.96

13 July 2004 2.96

14 July 2004 2.97

15 July 2004 2.97

16 July 2004 2.91

19 July 2004 2.90

20 July 2004 2.90

21 July 2004 2.94

22 July 2004 2.94

23 July 2004 2.92

26 July 2004 2.94

27 July 2004 2.97

28 July 2004 3.02

29 July 2004 3.03

30 July 2004 2.96

2 August 2004 2.97

3 August 2004 2.96

4 August 2004 2.92

5 August 2004 2.93

6 August 2004 2.89

9 August 2004 2.90

10 August 2004 2.89

11 August 2004 2.91

12 August 2004 2.96

13 August 2004 2.92

Date Percent

16 August 2004 2.93

17 August 2004 2.88

18 August 2004 2.90

19 August 2004 2.95

20 August 2004 2.94

23 August 2004 2.95

24 August 2004 2.95

25 August 2004 2.93

26 August 2004 2.91

27 August 2004 2.90

30 August 2004 2.87

31 August 2004 2.89

1 September 2004 2.87



6 September 2004 ND



















1 October 2004 2.76

4 October 2004 2.72

5 October 2004 2.74

Date Percent

6 October 2004 2.72

7 October 2004 2.80

8 October 2004 2.79

11 October 2004 ND

12 October 2004 2.80

13 October 2004 2.79

14 October 2004 2.77

15 October 2004 2.77

18 October 2004 2.76

19 October 2004 2.75

20 October 2004 2.70

21 October 2004 2.68

22 October 2004 2.65

25 October 2004 2.64

26 October 2004 2.63

27 October 2004 2.63

28 October 2004 2.71

29 October 2004 2.70

1 November 2004 2.72







10 November 2004 2.82

11 November 2004 ND

12 November 2004 2.77

15 November 2004 2.81

16 November 2004 2.76

17 November 2004 2.73

18 November 2004 2.76

19 November 2004 2.79

22 November 2004 2.83

23 November 2004 2.78

24 November 2004 2.78

25 November 2004 ND

Date Percent

26 November 2004 2.83

29 November 2004 2.82

30 November 2004 2.84

1 December 2004 2.84







10 December 2004 2.77

13 December 2004 2.78

14 December 2004 2.79

15 December 2004 2.79

16 December 2004 2.84

17 December 2004 2.86

20 December 2004 2.87

21 December 2004 2.92

22 December 2004 2.91

23 December 2004 2.94

24 December 2004 ND

27 December 2004 2.98

28 December 2004 2.96

29 December 2004 2.93

30 December 2004 2.91

31 December 2004 2.87

3 January 2005 2.77

4 January 2005 2.79

5 January 2005 2.75

6 January 2005 2.77

7 January 2005 2.73

10 January 2005 2.71

11 January 2005 2.67

12 January 2005 2.68

13 January 2005 2.67

14 January 2005 2.70

17 January 2005 ND

Date Percent

18 January 2005 2.69

19 January 2005 2.70

20 January 2005 2.72

21 January 2005 2.70

24 January 2005 2.67

25 January 2005 2.64

26 January 2005 2.66

27 January 2005 2.68

28 January 2005 2.68

31 January 2005 2.67








10 February 2005 2.56

11 February 2005 2.59

14 February 2005 2.58

15 February 2005 2.56

16 February 2005 2.56

17 February 2005 2.60

18 February 2005 2.66

21 February 2005 ND

22 February 2005 2.65

23 February 2005 2.66

24 February 2005 2.68

25 February 2005 2.66

28 February 2005 2.69

1 March 2005 2.73

2 March 2005 2.76

3 March 2005 2.77

4 March 2005 2.71

7 March 2005 2.72

8 March 2005 2.75

9 March 2005 2.81

Date Percent

10 March 2005 2.77

11 March 2005 2.80

14 March 2005 2.78

15 March 2005 2.83

16 March 2005 2.81

17 March 2005 2.83

18 March 2005 2.83

21 March 2005 2.83

22 March 2005 2.81

23 March 2005 2.78

24 March 2005 2.80

25 March 2005 ND

28 March 2005 2.78

29 March 2005 2.77

30 March 2005 2.73

31 March 2005 2.75

1 April 2005 2.76

4 April 2005 2.75

5 April 2005 2.73

6 April 2005 2.73

7 April 2005 2.72

8 April 2005 2.70

11 April 2005 2.69

12 April 2005 2.71

13 April 2005 2.76

14 April 2005 2.79

15 April 2005 2.76

18 April 2005 2.74

19 April 2005 2.70

20 April 2005 2.73

21 April 2005 2.74

22 April 2005 2.70

25 April 2005 2.64

26 April 2005 2.66

27 April 2005 2.62

28 April 2005 2.65

29 April 2005 2.64

Date Percent

2 May 2005 2.64

3 May 2005 2.63

4 May 2005 2.65

5 May 2005 2.65

6 May 2005 2.66

9 May 2005 2.67

10 May 2005 2.64

11 May 2005 2.63

12 May 2005 2.63

13 May 2005 2.60

16 May 2005 2.61

17 May 2005 2.60

18 May 2005 2.54

19 May 2005 2.52

20 May 2005 2.56

23 May 2005 2.54

24 May 2005 2.53

25 May 2005 2.54

26 May 2005 2.51

27 May 2005 2.53

30 May 2005 ND

31 May 2005 2.47

1 June 2005 2.47

2 June 2005 2.45

3 June 2005 2.50

6 June 2005 2.47

7 June 2005 2.44

8 June 2005 2.45

9 June 2005 2.44

10 June 2005 2.44

13 June 2005 2.45

14 June 2005 2.47

15 June 2005 2.49

16 June 2005 2.48

17 June 2005 2.46

20 June 2005 2.47

21 June 2005 2.43

Date Percent

22 June 2005 2.37

23 June 2005 2.37

24 June 2005 2.36

27 June 2005 2.36

28 June 2005 2.38

29 June 2005 2.40

30 June 2005 2.34

1 July 2005 2.39

4 July 2005 ND

5 July 2005 2.41

6 July 2005 2.38

7 July 2005 2.35

8 July 2005 2.35

11 July 2005 2.37

12 July 2005 2.39

13 July 2005 2.37

14 July 2005 2.35

15 July 2005 2.34

18 July 2005 2.37

19 July 2005 2.42

20 July 2005 2.41

21 July 2005 2.47

22 July 2005 2.46

25 July 2005 2.42

26 July 2005 2.43

27 July 2005 2.47

28 July 2005 2.44

29 July 2005 2.50

1 August 2005 2.47

2 August 2005 2.46

3 August 2005 2.47

4 August 2005 2.49

5 August 2005 2.48

8 August 2005 2.49

9 August 2005 2.47

10 August 2005 2.51

11 August 2005 2.48

Date Percent

12 August 2005 2.43

15 August 2005 2.47

16 August 2005 2.46

17 August 2005 2.52

18 August 2005 2.48

19 August 2005 2.50

22 August 2005 2.47

23 August 2005 2.49

24 August 2005 2.51

25 August 2005 2.46

26 August 2005 2.47

29 August 2005 2.48

30 August 2005 2.50

31 August 2005 2.40



5 September 2005 ND




















3 October 2005 2.59

Date Percent

4 October 2005 2.58

5 October 2005 2.58

6 October 2005 2.55

7 October 2005 2.54

10 October 2005 ND

11 October 2005 2.49

12 October 2005 2.50

13 October 2005 2.58

14 October 2005 2.56

17 October 2005 2.60

18 October 2005 2.63

19 October 2005 2.62

20 October 2005 2.61

21 October 2005 2.56

24 October 2005 2.58

25 October 2005 2.61

26 October 2005 2.66

27 October 2005 2.66

28 October 2005 2.68

31 October 2005 2.69








10 November 2005 2.68

11 November 2005 ND

14 November 2005 2.64

15 November 2005 2.62

16 November 2005 2.61

17 November 2005 2.61

18 November 2005 2.59

21 November 2005 2.57

22 November 2005 2.57

23 November 2005 2.56

Date Percent

24 November 2005 ND

25 November 2005 2.51

28 November 2005 2.54

29 November 2005 2.56

30 November 2005 2.60








12 December 2005 2.58

13 December 2005 2.59

14 December 2005 2.52

15 December 2005 2.51

16 December 2005 2.52

19 December 2005 2.53

20 December 2005 2.53

21 December 2005 2.53

22 December 2005 2.48

23 December 2005 2.48

26 December 2005 ND

27 December 2005 2.45

28 December 2005 2.45

29 December 2005 2.43

30 December 2005 2.44

2 January 2006 ND

3 January 2006 2.47

4 January 2006 2.48

5 January 2006 2.46

6 January 2006 2.44

9 January 2006 2.43

10 January 2006 2.47

11 January 2006 2.50

12 January 2006 2.52

13 January 2006 2.50

Date Percent

16 January 2006 ND

17 January 2006 2.51

18 January 2006 2.53

19 January 2006 2.54

20 January 2006 2.55

23 January 2006 2.51

24 January 2006 2.50

25 January 2006 2.52

26 January 2006 2.56

27 January 2006 2.58

30 January 2006 2.58

31 January 2006 2.60








10 February 2006 2.57

13 February 2006 2.57

14 February 2006 2.57

15 February 2006 2.55

16 February 2006 2.56

17 February 2006 2.52

20 February 2006 ND

21 February 2006 2.51

22 February 2006 2.49

23 February 2006 2.50

24 February 2006 2.52

27 February 2006 2.52

28 February 2006 2.53

1 March 2006 2.54

2 March 2006 2.58

3 March 2006 2.61

6 March 2006 2.62

7 March 2006 2.61

Date Percent

8 March 2006 2.58

9 March 2006 2.59

10 March 2006 2.60

13 March 2006 2.59

14 March 2006 2.61

15 March 2006 2.61

16 March 2006 2.57

17 March 2006 2.59

20 March 2006 2.55

21 March 2006 2.55

22 March 2006 2.55

23 March 2006 2.57

24 March 2006 2.54

27 March 2006 2.55

28 March 2006 2.56

29 March 2006 2.56

30 March 2006 2.58

31 March 2006 2.60

3 April 2006 2.60

4 April 2006 2.59

5 April 2006 2.60

6 April 2006 2.61

7 April 2006 2.63

10 April 2006 2.64

11 April 2006 2.63

12 April 2006 2.62

13 April 2006 2.63

14 April 2006 ND

17 April 2006 2.63

18 April 2006 2.67

19 April 2006 2.72

20 April 2006 2.72

21 April 2006 2.71

24 April 2006 2.70

25 April 2006 2.73

26 April 2006 2.75

27 April 2006 2.77

Date Percent

28 April 2006 2.82

1 May 2006 2.83

2 May 2006 2.79

3 May 2006 2.77

4 May 2006 2.75

5 May 2006 2.75

8 May 2006 2.74

9 May 2006 2.76

10 May 2006 2.74

11 May 2006 2.80

12 May 2006 2.78

15 May 2006 2.77

16 May 2006 2.76

17 May 2006 2.79

18 May 2006 2.74

19 May 2006 2.69

22 May 2006 2.71

23 May 2006 2.70

24 May 2006 2.69

25 May 2006 2.69

26 May 2006 2.71

29 May 2006 ND

30 May 2006 2.73

31 May 2006 2.75

1 June 2006 2.74

2 June 2006 2.72

5 June 2006 2.70

6 June 2006 2.64

7 June 2006 2.61

8 June 2006 2.61

9 June 2006 2.59

12 June 2006 2.59

13 June 2006 2.60

14 June 2006 2.61

15 June 2006 2.65

16 June 2006 2.66

19 June 2006 2.64

Date Percent

20 June 2006 2.64

21 June 2006 2.63

22 June 2006 2.64

23 June 2006 2.65

26 June 2006 2.66

27 June 2006 2.64

28 June 2006 2.67

29 June 2006 2.68

30 June 2006 2.68

3 July 2006 2.66

4 July 2006 ND

5 July 2006 2.66

6 July 2006 2.65

7 July 2006 2.64

10 July 2006 2.64

11 July 2006 2.62

12 July 2006 2.59

13 July 2006 2.61

14 July 2006 2.63

17 July 2006 2.64

18 July 2006 2.64

19 July 2006 2.64

20 July 2006 2.65

21 July 2006 2.62

24 July 2006 2.62

25 July 2006 2.67

26 July 2006 2.68

27 July 2006 2.68

28 July 2006 2.68

31 July 2006 2.69

1 August 2006 2.68

2 August 2006 2.68

3 August 2006 2.68

4 August 2006 2.69

7 August 2006 2.68

8 August 2006 2.72

9 August 2006 2.74

Date Percent

10 August 2006 2.72

11 August 2006 2.71

14 August 2006 2.70

15 August 2006 2.71

16 August 2006 2.71

17 August 2006 2.71

18 August 2006 2.70

21 August 2006 2.71

22 August 2006 2.73

23 August 2006 2.73

24 August 2006 2.71

25 August 2006 2.73

28 August 2006 2.72

29 August 2006 2.68

30 August 2006 2.68

31 August 2006 2.68


4 September 2006 ND




















Date Percent

2 October 2006 2.57

3 October 2006 2.56

4 October 2006 2.56

5 October 2006 2.57

6 October 2006 2.59

9 October 2006 ND

10 October 2006 2.57

11 October 2006 2.56

12 October 2006 2.56

13 October 2006 2.58

16 October 2006 2.59

17 October 2006 2.57

18 October 2006 2.57

19 October 2006 2.60

20 October 2006 2.61

23 October 2006 2.60

24 October 2006 2.61

25 October 2006 2.61

26 October 2006 2.64

27 October 2006 2.63

30 October 2006 2.61

31 October 2006 2.60








10 November 2006 2.61

13 November 2006 2.63

14 November 2006 2.59

15 November 2006 2.58

16 November 2006 2.57

17 November 2006 2.57

20 November 2006 2.54

21 November 2006 2.50

Date Percent

22 November 2006 2.51

23 November 2006 ND

24 November 2006 2.50

27 November 2006 2.50

28 November 2006 2.50

29 November 2006 2.50

30 November 2006 2.53







11 December 2006 2.54

12 December 2006 2.53

13 December 2006 2.55

14 December 2006 2.54

15 December 2006 2.51

18 December 2006 2.50

19 December 2006 2.48

20 December 2006 2.48

21 December 2006 2.44

22 December 2006 2.44

25 December 2006 ND

26 December 2006 2.44

27 December 2006 2.43

28 December 2006 2.46

29 December 2006 2.47

1 January 2007 ND

2 January 2007 2.47

3 January 2007 2.47

4 January 2007 2.44

5 January 2007 2.46

8 January 2007 2.45

9 January 2007 2.42

10 January 2007 2.42

11 January 2007 2.41

Date Percent

12 January 2007 2.40

15 January 2007 ND

16 January 2007 2.46

17 January 2007 2.47

18 January 2007 2.48

19 January 2007 2.49

22 January 2007 2.50

23 January 2007 2.53

24 January 2007 2.55

25 January 2007 2.55

26 January 2007 2.56

29 January 2007 2.54

30 January 2007 2.55

31 January 2007 2.55








12 February 2007 2.48

13 February 2007 2.48

14 February 2007 2.49

15 February 2007 2.48

16 February 2007 2.49

19 February 2007 ND

20 February 2007 2.49

21 February 2007 2.48

22 February 2007 2.50

23 February 2007 2.51

26 February 2007 2.49

27 February 2007 2.47

28 February 2007 2.49

1 March 2007 2.49

2 March 2007 2.48

5 March 2007 2.44

Date Percent

6 March 2007 2.45

7 March 2007 2.44

8 March 2007 2.44

9 March 2007 2.43

12 March 2007 2.42

13 March 2007 2.44

14 March 2007 2.46

15 March 2007 2.48

16 March 2007 2.48

19 March 2007 2.47

20 March 2007 2.46

21 March 2007 2.50

22 March 2007 2.54

23 March 2007 2.54

26 March 2007 2.55

27 March 2007 2.56

28 March 2007 2.56

29 March 2007 2.55

30 March 2007 2.55

2 April 2007 2.55

3 April 2007 2.53

4 April 2007 2.54

5 April 2007 2.57

6 April 2007 2.59

9 April 2007 2.58

10 April 2007 2.58

11 April 2007 2.56

12 April 2007 2.56

13 April 2007 2.55

16 April 2007 2.54

17 April 2007 2.53

18 April 2007 2.51

19 April 2007 2.51

20 April 2007 2.52

23 April 2007 2.51

24 April 2007 2.49

25 April 2007 2.51

Date Percent

26 April 2007 2.51

27 April 2007 2.53

30 April 2007 2.48

1 May 2007 2.48

2 May 2007 2.50

3 May 2007 2.49

4 May 2007 2.46

7 May 2007 2.44

8 May 2007 2.45

9 May 2007 2.45

10 May 2007 2.45

11 May 2007 2.45

14 May 2007 2.44

15 May 2007 2.42

16 May 2007 2.41

17 May 2007 2.40

18 May 2007 2.43

21 May 2007 2.44

22 May 2007 2.47

23 May 2007 2.50

24 May 2007 2.52

25 May 2007 2.52

28 May 2007 ND

29 May 2007 2.51

30 May 2007 2.53

31 May 2007 2.55

1 June 2007 2.55

4 June 2007 2.54

5 June 2007 2.55

6 June 2007 2.56

7 June 2007 2.60

8 June 2007 2.62

11 June 2007 2.63

12 June 2007 2.66

13 June 2007 2.65

14 June 2007 2.66

15 June 2007 2.64

Date Percent

18 June 2007 2.63

19 June 2007 2.63

20 June 2007 2.65

21 June 2007 2.68

22 June 2007 2.71

25 June 2007 2.69

26 June 2007 2.66

27 June 2007 2.65

28 June 2007 2.63

29 June 2007 2.61

2 July 2007 2.62

3 July 2007 2.62

4 July 2007 ND

5 July 2007 2.63

6 July 2007 2.64

9 July 2007 2.64

10 July 2007 2.62

11 July 2007 2.63

12 July 2007 2.62

13 July 2007 2.62

16 July 2007 2.61

17 July 2007 2.63

18 July 2007 2.63

19 July 2007 2.65

20 July 2007 2.62

23 July 2007 2.63

24 July 2007 2.67

25 July 2007 2.69

26 July 2007 2.64

27 July 2007 2.68

30 July 2007 2.69

31 July 2007 2.70

1 August 2007 2.67

2 August 2007 2.66

3 August 2007 2.62

6 August 2007 2.63

7 August 2007 2.65

Date Percent

8 August 2007 2.67

9 August 2007 2.67

10 August 2007 2.71

13 August 2007 2.68

14 August 2007 2.65

15 August 2007 2.67

16 August 2007 2.70

17 August 2007 2.71

20 August 2007 2.69

21 August 2007 2.70

22 August 2007 2.70

23 August 2007 2.68

24 August 2007 2.68

27 August 2007 2.69

28 August 2007 2.70

29 August 2007 2.68

30 August 2007 2.68

31 August 2007 2.66

3 September 2007 ND



















Date Percent


1 October 2007 2.79

2 October 2007 2.79

3 October 2007 2.78

4 October 2007 2.78

5 October 2007 2.79

8 October 2007 ND

9 October 2007 2.79

10 October 2007 2.80

11 October 2007 2.80

12 October 2007 2.79

15 October 2007 2.77

16 October 2007 2.77

17 October 2007 2.76

18 October 2007 2.74

19 October 2007 2.73

22 October 2007 2.73

23 October 2007 2.75

24 October 2007 2.74

25 October 2007 2.74

26 October 2007 2.78

29 October 2007 2.76

30 October 2007 2.77

31 October 2007 2.74








12 November 2007 ND

13 November 2007 2.78

14 November 2007 2.75

15 November 2007 2.73

16 November 2007 2.75

19 November 2007 2.77

Date Percent

20 November 2007 2.77

21 November 2007 2.79

22 November 2007 ND

23 November 2007 2.77

26 November 2007 2.74

27 November 2007 2.77

28 November 2007 2.72

29 November 2007 2.75

30 November 2007 2.77






10 December 2007 2.75

11 December 2007 2.71

12 December 2007 2.72

13 December 2007 2.73

14 December 2007 2.74

17 December 2007 2.74

18 December 2007 2.75

19 December 2007 2.71

20 December 2007 2.73

21 December 2007 2.77

24 December 2007 2.77

25 December 2007 ND

26 December 2007 2.78

27 December 2007 2.74

28 December 2007 2.69

31 December 2007 2.72

1 January 2008 ND

2 January 2008 2.71

3 January 2008 2.65

4 January 2008 2.67

7 January 2008 2.64

8 January 2008 2.65

9 January 2008 2.64

Date Percent

10 January 2008 2.70

11 January 2008 2.75

14 January 2008 2.78

15 January 2008 2.76

16 January 2008 2.75

17 January 2008 2.78

18 January 2008 2.79

21 January 2008 ND

22 January 2008 2.89

23 January 2008 2.96

24 January 2008 2.96

25 January 2008 2.93

28 January 2008 2.94

29 January 2008 3.00

30 January 2008 3.00

31 January 2008 3.00







11 February 2008 3.00

12 February 2008 3.00

13 February 2008 2.95

14 February 2008 2.93

15 February 2008 2.90

18 February 2008 ND

19 February 2008 2.93

20 February 2008 2.96

21 February 2008 2.90

22 February 2008 2.90

25 February 2008 2.93

26 February 2008 2.97

27 February 2008 2.95

28 February 2008 2.99

29 February 2008 2.94

Date Percent

3 March 2008 2.99

4 March 2008 3.10

5 March 2008 3.16

6 March 2008 3.15

7 March 2008 3.20

10 March 2008 3.19

11 March 2008 3.19

12 March 2008 3.17

13 March 2008 3.18

14 March 2008 3.15

17 March 2008 3.12

18 March 2008 3.11

19 March 2008 3.03

20 March 2008 3.01

21 March 2008 3.01

24 March 2008 3.01

25 March 2008 2.96

26 March 2008 2.97

27 March 2008 3.03

28 March 2008 3.04

31 March 2008 3.02

1 April 2008 3.07

2 April 2008 3.07

3 April 2008 3.01

4 April 2008 2.98

7 April 2008 2.97

8 April 2008 2.98

9 April 2008 2.96

10 April 2008 2.92

11 April 2008 2.95

14 April 2008 2.97

15 April 2008 2.96

16 April 2008 2.96

17 April 2008 2.91

18 April 2008 2.93

21 April 2008 2.88

22 April 2008 2.82

Date Percent

23 April 2008 2.83

24 April 2008 2.80

25 April 2008 2.79

28 April 2008 2.75

29 April 2008 2.77

30 April 2008 2.74

1 May 2008 2.77

2 May 2008 2.82

5 May 2008 2.82

6 May 2008 2.84

7 May 2008 2.81

8 May 2008 2.84

9 May 2008 2.84

12 May 2008 2.83

13 May 2008 2.83

14 May 2008 2.82

15 May 2008 2.81

16 May 2008 2.84

19 May 2008 2.84

20 May 2008 2.86

21 May 2008 2.86

22 May 2008 2.86

23 May 2008 2.89

26 May 2008 ND

27 May 2008 2.85

28 May 2008 2.84

29 May 2008 2.83

30 May 2008 2.89

2 June 2008 2.91

3 June 2008 2.89

4 June 2008 2.90

5 June 2008 2.92

6 June 2008 2.90

9 June 2008 2.87

10 June 2008 2.83

11 June 2008 2.81

12 June 2008 2.78

Date Percent

13 June 2008 2.78

16 June 2008 2.80

17 June 2008 2.82

18 June 2008 2.77

19 June 2008 2.81

20 June 2008 2.78

23 June 2008 2.72

* Five-to-ten years ahead. Return to table

Middle-left panelPCE Price Projections

(Percent change, annual rate)

20082009

H1 H2

1. Total 3.8 4.5 2.1

2. (April GB) 3.9 2.7 1.8

3. Core 2.1 2.5 2.2

4. (April GB) 2.2 2.4 2.0

Note: Annual figures are Q4/Q4 percent changes.

Middle-right panelAlternative Simulation

Long-run inflation expectations move up ¾ percentage point relative to baseline.Monetary policy responds according to the estimated Taylor rule.

Bottom-left panelUnemployment Rate

Percent

Period Baseline Baseline ForecastHigher inflation

expectations

70% confidenceinterval

upper bound


lower bound

2006:Q1 4.70 ND ND ND ND

2006:Q2 4.67 ND ND ND ND

2006:Q3 4.66 ND ND ND ND

2006:Q4 4.44 ND ND ND ND

2007:Q1 4.49 ND ND ND ND

2007:Q2 4.51 ND ND ND ND

2007:Q3 4.68 ND ND ND ND

2007:Q4 4.80 ND ND ND ND


expectations


upper bound


lower bound

2008:Q1 4.94 ND ND ND ND

2008:Q2 5.26 5.26 5.26 5.26 5.26

2008:Q3 ND 5.50 5.50 5.71 5.29

2008:Q4 ND 5.61 5.61 5.90 5.30

2009:Q1 ND 5.66 5.67 6.03 5.29

2009:Q2 ND 5.67 5.67 6.10 5.22

2009:Q3 ND 5.69 5.68 6.16 5.19

2009:Q4 ND 5.64 5.62 6.15 5.09

2010:Q1 ND 5.58 5.55 6.12 4.98

2010:Q2 ND 5.52 5.49 6.08 4.89

2010:Q3 ND 5.45 5.43 6.03 4.79

2010:Q4 ND 5.39 5.38 5.98 4.70

2011:Q1 ND 5.32 5.33 5.95 4.60

2011:Q2 ND 5.26 5.29 5.91 4.51

2011:Q3 ND 5.20 5.24 5.86 4.41

2011:Q4 ND 5.13 5.20 5.83 4.34

2012:Q1 ND 5.07 5.15 5.79 4.25

2012:Q2 ND 5.00 5.10 5.73 4.17

2012:Q3 ND 4.94 5.05 5.69 4.09

2012:Q4 ND 4.88 5.01 5.65 4.01

Bottom-center panelCore PCE Prices



expectations


upper bound


lower bound

2006:Q1 2.04 ND ND ND ND

2006:Q2 2.24 ND ND ND ND

2006:Q3 2.40 ND ND ND ND

2006:Q4 2.29 ND ND ND ND

2007:Q1 2.39 ND ND ND ND

2007:Q2 2.01 ND ND ND ND

2007:Q3 1.92 ND ND ND ND

2007:Q4 2.08 ND ND ND ND

2008:Q1 2.03 ND ND ND ND

2008:Q2 2.17 2.17 2.17 2.17 2.17


expectations


upper bound


lower bound

2008:Q3 ND 2.29 2.27 2.48 2.11

2008:Q4 ND 2.30 2.33 2.58 2.03

2009:Q1 ND 2.34 2.48 2.72 1.98

2009:Q2 ND 2.42 2.65 2.89 1.97

2009:Q3 ND 2.33 2.68 2.88 1.81

2009:Q4 ND 2.21 2.61 2.81 1.65

2010:Q1 ND 2.12 2.53 2.76 1.53

2010:Q2 ND 2.05 2.47 2.72 1.45

2010:Q3 ND 2.00 2.44 2.71 1.38

2010:Q4 ND 1.96 2.40 2.69 1.30

2011:Q1 ND 1.92 2.35 2.69 1.22

2011:Q2 ND 1.88 2.32 2.68 1.18

2011:Q3 ND 1.85 2.28 2.66 1.14

2011:Q4 ND 1.82 2.25 2.64 1.11

2012:Q1 ND 1.79 2.23 2.63 1.07

2012:Q2 ND 1.77 2.20 2.63 1.07

2012:Q3 ND 1.76 2.18 2.62 1.05

2012:Q4 ND 1.74 2.17 2.62 1.04

Bottom-right panelFederal Funds Rate

Percent


expectations


upper bound


lower bound

2006:Q1 4.46 ND ND ND ND

2006:Q2 4.91 ND ND ND ND

2006:Q3 5.25 ND ND ND ND

2006:Q4 5.25 ND ND ND ND

2007:Q1 5.26 ND ND ND ND

2007:Q2 5.25 ND ND ND ND

2007:Q3 5.07 ND ND ND ND

2007:Q4 4.50 ND ND ND ND

2008:Q1 3.18 ND ND ND ND

2008:Q2 2.10 2.10 2.10 2.10 2.10

2008:Q3 ND 2.00 2.00 2.41 1.62

2008:Q4 ND 2.00 1.98 2.67 1.35


expectations


upper bound


lower bound

2009:Q1 ND 2.20 2.21 3.15 1.29

2009:Q2 ND 2.50 2.63 3.64 1.39

2009:Q3 ND 2.75 3.04 4.10 1.52

2009:Q4 ND 2.75 3.20 4.23 1.43

2010:Q1 ND 2.75 3.32 4.29 1.39

2010:Q2 ND 3.00 3.64 4.60 1.62

2010:Q3 ND 3.00 3.67 4.68 1.64

2010:Q4 ND 3.25 3.92 4.97 1.88

2011:Q1 ND 3.25 3.90 4.98 1.85

2011:Q2 ND 3.25 3.87 5.00 1.89

2011:Q3 ND 3.25 3.83 5.05 1.85

2011:Q4 ND 3.50 4.04 5.40 2.06

2012:Q1 ND 3.71 4.22 5.58 2.26

2012:Q2 ND 3.90 4.37 5.77 2.40

2012:Q3 ND 4.06 4.50 5.96 2.55

2012:Q4 ND 4.19 4.60 6.07 2.67

Appendix 3: Materials used by Mr. Madigan

Material for Briefing on FOMC Participants' Economic ProjectionsBrian MadiganJune 24, 2008

Class I FOMC - Restricted Controlled (FR)

Table 1:Economic Projections of Federal Reserve Governors and Reserve Bank Presidents

2008:H1 2008:H2

Central Tendencies(percent, annual rate)

Real GDP Growth 1.2 to 1.4 0.6 to 2.1

April projections -0.4 to 0.5 1.0 to 1.9

PCE Inflation 3.7 to 4.0 3.6 to 4.6

April projections 3.5 to 4.0 2.5 to 3.1

Core PCE Inflation 2.1 to 2.2 2.3 to 2.5


2008:H1 2008:H2

Ranges(percent, annual rate)

Real GDP Growth 1.0 to 1.5 0.4 to 2.2

April projections -0.5 to 0.6 0.4 to 2.9

PCE Inflation 3.6 to 4.6 3.2 to 4.8


Core PCE Inflation 2.0 to 2.4 2.0 to 2.6


Memo: Greenbook(percent, annual rate)

Real GDP Growth 1.4 0.7

April Greenbook -0.5 0.9

PCE Inflation 3.8 4.5

April Greenbook 3.9 2.7

Core PCE Inflation 2.1 2.5

April Greenbook 2.2 2.4

Table 2:Economic Projections of Federal Reserve Governors and Reserve Bank Presidents

2008 2009 2010

Central Tendencies(percent)

Real GDP Growth 1.0 to 1.6 2.0 to 2.8 2.5 to 3.0

April projections 0.3 to 1.2 2.0 to 2.8 2.6 to 3.1

Unemployment Rate 5.5 to 5.7 5.3 to 5.8 5.0 to 5.6


PCE Inflation 3.8 to 4.2 2.0 to 2.3 1.8 to 2.0


Core PCE Inflation 2.2 to 2.4 2.0 to 2.2 1.8 to 2.0


Ranges(percent)

Real GDP Growth 0.9 to 1.8 1.9 to 3.0 2.0 to 3.5


Unemployment Rate 5.5 to 5.8 5.2 to 6.1 5.0 to 5.8

2008 2009 2010


PCE Inflation 3.4 to 4.6 1.7 to 3.0 1.6 to 2.1


Core PCE Inflation 2.0 to 2.5 1.8 to 2.3 1.5 to 2.0


Memo: Greenbook(percent)

Real GDP Growth 1.0 2.4 3.1

April Greenbook 0.2 2.8 3.1

Unemployment Rate 5.6 5.6 5.4


PCE Inflation 4.2 2.1 1.9


Core PCE Inflation 2.3 2.2 2.0


Exhibit 3Risks and Uncertainty in Economic Projections

Top-left panelRisk Weighting around Outlook for Real GDP Growth

Number of participants

Weighted to Downside Broadly Balanced Weighted to Upside

January 13 3 1

April 13 4 0

June 14 3 0

Top-right panelDegree of Uncertainty about Outlook for Real GDP Growth


Lower Historically Normal Higher

January 0 2 15

April 0 3 14

June 0 4 13

Bottom-left panelRisk Weighting around Outlook for Total PCE Inflation


Weighted to Downside Broadly Balanced Weighted to Upside

January 0 11 6

April 0 9 8

June 0 4 13

Bottom-right panelDegree of Uncertainty about Outlook for Total PCE Inflation


Lower Historically Normal Higher

January 0 12 5

April 1 5 11

June 0 4 13

Exhibit 4Consideration of Long-Term Projections

Top panelIssue

Current three-year horizon for projections does not always reveal your views of:Steady-state characteristics of economy

Sustainable rate of unemploymentSustainable rate of output growth

Rate of inflation consistent with dual mandate

Bottom panelAlternative approaches

Extend entire set of projections for four variables and forecast narratives out to five years.a. Advantage: full, coherent presentationb. Disadvantage: burden on participants

1.

Maintain three-year projection horizon for four variables but add fifth-year projections foroutput growth, unemployment, and total inflation

a. Advantage: less burden on participantsb. Disadvantage: less complete explanation of transition to steady state

2.

Maintain three-year projection horizon for four variables but add estimates of long-runaverages of output growth, unemployment, and total inflation five to ten years ahead

a. Advantage: no need for participants to project fourth and fifth years for four variablesb. Disadvantages:

i. Less complete explanation of transition to steady stateii. Need to forecast long-run demographic and productivity trends

3.

Appendix 4: Materials used by Mr. Madigan

Material for FOMC Briefing on Monetary Policy AlternativesBrian MadiganJune 24-25, 2008


Exhibit 1

Table 1: Alternative Language for the June 2008 FOMC AnnouncementBluebook version, slightly revised[Note: In Appendix 4, Table 1, strong emphasis (bold) has been added to indicate underlined red text in the original document. Emphasis (strike-through) indicates strike-through underlined blue text in the original document.]

April FOMC Alternative A Alternative B Alternative C

PolicyDecision

1. The Federal Open MarketCommittee decided today tolower its target for the federalfunds rate 25 basis points to 2percent.

The Federal Open MarketCommittee decided today tolower its target for the federalfunds rate 25 basis points to1-¾ percent.

The Federal Open MarketCommittee decided today tokeep its target for the federalfunds rate at 2 percent.

The Federal Open MarketCommittee decided today toraise its target for the federalfunds rate 25 basis points to2-¼ percent.

Rationale

2. Recent informationindicates that economicactivity remains weak.Household and businessspending has been subduedand labor markets havesoftened further. Financialmarkets remain underconsiderable stress, and tightcredit conditions and thedeepening housingcontraction are likely toweigh on economic growthover the next few quarters.

Recent information indicatesthat economic activity hasremained weak in recentmonths. Although consumerspending appears to havefirmed somewhat,residential investment hascontinued to contractsharply and labor marketshave softened further.Financial markets remainunder considerable stress, andtight credit conditions and thedeepening housingcontraction are likely toweigh on economic growthover the next few quarters.

Recent information indicatesthat overall economic activitycontinues to expand, partlyreflecting some firming inhousehold spending.However, labor markets havesoftened further and financialmarkets remain underconsiderable stress. Tightcredit conditions, the ongoinghousing contraction, and therise in energy prices arelikely to weigh on economicgrowth over the next fewquarters.

Recent information indicatesthat overall economic activitycontinues to expand, partlyreflecting some firming inhousehold spending.However, labor markets havesoftened further and financialmarkets remain underconsiderable stress. Tightcredit conditions, the ongoinghousing contraction, and therise in energy prices arelikely to weigh on economicgrowth over the next fewquarters.

3. Although readings on coreinflation have improvedsomewhat, energy and othercommodity prices haveincreased, and someindicators of inflationexpectations have risen inrecent months. TheCommittee expects inflationto moderate in comingquarters, reflecting aprojected leveling-out ofenergy and other commodityprices and an easing ofpressures on resourceutilization. Still, uncertaintyabout the inflation outlookremains high. It will benecessary to continue tomonitor inflationdevelopments carefully.

Although energy prices haveincreased further and someindicators of inflationexpectations have risen inrecent months, core inflationhas been stable of late. TheCommittee expects inflationto moderate later this yearand next year, reflecting aprojected leveling-out ofenergy prices and an easing ofpressures on resourceutilization. Still, uncertaintyabout the inflation outlookremains high. It will benecessary to continue tomonitor inflationdevelopments carefully.

The Committee expectsinflation to moderate laterthis year and next year.However, in light of thecontinued increases in theprices of energy and someother commodities and theelevated state of someindicators of inflationexpectations, uncertaintyabout the inflation outlookremains high.

Overall inflation has beenelevated, energy prices havecontinued to increase, andsome indicators of inflationexpectations have risenfurther. The Committeeexpects inflation to moderatelater this year and nextyear, partly reflectingtoday's policy action. Still,uncertainty about the inflationoutlook remains high. It willbe necessary to continue tomonitor inflationdevelopments carefully.

April FOMC Alternative A Alternative B Alternative C

Assessmentof Risk

4. The substantial easing ofmonetary policy to date,combined with ongoingmeasures to foster marketliquidity, should help topromote moderate growthover time and to mitigaterisks to economic activity.The Committee will continueto monitor economic andfinancial developments andwill act as needed to promotesustainable economic growthand price stability.

The substantial easing ofmonetary policy to date,combined with ongoingmeasures to foster marketliquidity, should help topromote moderate growthover time and to mitigaterisks to economic activity.The Committee will continueto monitor economic andfinancial developments andwill act as needed to promotesustainable economic growthand price stability.

The substantial easing ofmonetary policy to date,combined with ongoingmeasures to foster marketliquidity, should help topromote moderate growthover time. Althoughdownside risks to growthremain, they appear to havediminished somewhat, andthe upside risks to near-terminflation and inflationexpectations have increased.The Committee will continueto monitor economic andfinancial developments andwill act as needed to promotesustainable economic growthand price stability.

Future policy adjustmentswill depend on the evolutionof the outlook for bothinflation and economicgrowth, as implied byincoming information onthe economy and financialconditions.

Exhibit 2Optimal Policy Under Alternative Inflation Goals

1½ Percent Inflation Goal

Top-left panelFederal funds rate

Percent

Period Current Bluebook April Bluebook

2008:Q2 2.10 2.99

2008:Q3 2.34 2.81

2008:Q4 2.51 2.62

2009:Q1 2.62 2.44

2009:Q2 2.69 2.28

2009:Q3 2.74 2.17

2009:Q4 2.79 2.10

2010:Q1 2.83 2.09

2010:Q2 2.88 2.12

2010:Q3 2.93 2.19

2010:Q4 3.01 2.31

2011:Q1 3.10 2.46

2011:Q2 3.20 2.64

2011:Q3 3.32 2.83

2011:Q4 3.45 3.04

2012:Q1 3.58 3.26


2012:Q2 3.71 3.46

2012:Q3 3.84 3.66

2012:Q4 3.96 3.83

Middle-left panelCivilian unemployment rate

Percent


2008:Q2 5.26 5.20

2008:Q3 5.50 5.48

2008:Q4 5.61 5.73

2009:Q1 5.68 5.78

2009:Q2 5.69 5.74

2009:Q3 5.72 5.71

2009:Q4 5.68 5.60

2010:Q1 5.62 5.49

2010:Q2 5.56 5.39

2010:Q3 5.50 5.29

2010:Q4 5.43 5.20

2011:Q1 5.37 5.11

2011:Q2 5.31 5.03

2011:Q3 5.25 4.96

2011:Q4 5.18 4.88

2012:Q1 5.12 4.81

2012:Q2 5.06 4.76

2012:Q3 5.00 4.71

2012:Q4 4.94 4.67

Bottom-left panelCore PCE inflation

Four-quarter averagePercent


2008:Q2 2.17 2.16

2008:Q3 2.28 2.24

2008:Q4 2.28 2.20

2009:Q1 2.32 2.21

2009:Q2 2.39 2.17


2009:Q3 2.30 2.04

2009:Q4 2.18 1.90

2010:Q1 2.09 1.80

2010:Q2 2.02 1.74

2010:Q3 1.97 1.70

2010:Q4 1.92 1.66

2011:Q1 1.88 1.63

2011:Q2 1.84 1.60

2011:Q3 1.81 1.59

2011:Q4 1.78 1.59

2012:Q1 1.75 1.59

2012:Q2 1.73 1.59

2012:Q3 1.71 1.58

2012:Q4 1.70 1.58

2 Percent Inflation Goal

Top-right panelFederal funds rate

Percent


2008:Q2 2.10 2.64

2008:Q3 1.99 2.20

2008:Q4 1.90 1.82

2009:Q1 1.82 1.52

2009:Q2 1.77 1.31

2009:Q3 1.77 1.19

2009:Q4 1.80 1.17

2010:Q1 1.89 1.23

2010:Q2 2.02 1.36

2010:Q3 2.18 1.56

2010:Q4 2.38 1.81

2011:Q1 2.61 2.10

2011:Q2 2.85 2.42

2011:Q3 3.11 2.76

2011:Q4 3.38 3.10

2012:Q1 3.64 3.43


2012:Q2 3.88 3.75

2012:Q3 4.12 4.04

2012:Q4 4.33 4.29

Middle-right panelCivilian unemployment rate

Percent


2008:Q2 5.26 5.20

2008:Q3 5.50 5.46

2008:Q4 5.59 5.67

2009:Q1 5.61 5.67

2009:Q2 5.58 5.58

2009:Q3 5.56 5.50

2009:Q4 5.47 5.35

2010:Q1 5.37 5.21

2010:Q2 5.27 5.07

2010:Q3 5.18 4.95

2010:Q4 5.09 4.85

2011:Q1 5.01 4.75

2011:Q2 4.94 4.67

2011:Q3 4.88 4.59

2011:Q4 4.82 4.53

2012:Q1 4.77 4.48

2012:Q2 4.73 4.44

2012:Q3 4.69 4.42

2012:Q4 4.65 4.41

Bottom-right panelCore PCE inflation

Four-quarter averagePercent


2008:Q2 2.17 2.20

2008:Q3 2.33 2.30

2008:Q4 2.35 2.29

2009:Q1 2.41 2.32

2009:Q2 2.50 2.28


2009:Q3 2.41 2.16

2009:Q4 2.30 2.04

2010:Q1 2.22 1.96

2010:Q2 2.18 1.92

2010:Q3 2.15 1.90

2010:Q4 2.13 1.88

2011:Q1 2.11 1.87

2011:Q2 2.09 1.86

2011:Q3 2.08 1.87

2011:Q4 2.07 1.88

2012:Q1 2.06 1.89

2012:Q2 2.05 1.90

2012:Q3 2.04 1.91

2012:Q4 2.04 1.92

Exhibit 3Equilibrium Real Federal Funds Rate

Top panelShort-Run Estimates with Confidence Intervals

Percent

Period

Lowerbound of

90%confidence

interval

Lowerbound of

70%confidence

interval

Lowerbound ofrange ofmodelbased

estimates

Theactual

real fundsrate

based onlaggedcore

inflation

Greenbook-consistentmeasure

Upperbound ofrange ofmodelbased

estimates

Upperbound of

70%confidence

interval

Upperbound of

90%confidence

interval

1990:Q1 0.17 1.13 2.23 4.51 ND 3.93 4.51 5.47

1990:Q2 0.12 1.09 2.00 4.03 ND 3.61 4.31 5.23

1990:Q3 -0.61 0.32 1.21 3.73 ND 3.06 3.70 4.65

1990:Q4 -0.97 -0.03 1.09 3.45 ND 2.74 3.32 4.28

1991:Q1 -1.11 -0.17 0.81 2.18 ND 2.38 3.07 4.00

1991:Q2 -0.86 0.08 1.18 2.16 ND 2.76 3.39 4.33

1991:Q3 -0.83 0.17 1.12 1.99 ND 2.94 3.53 4.44

1991:Q4 -0.77 0.23 1.10 1.07 ND 2.87 3.51 4.44

1992:Q1 -0.46 0.52 1.42 0.44 ND 3.20 3.81 4.74

Period

Lowerbound of

90%confidence

interval

Lowerbound of

70%confidence

interval


estimates

Theactual

real fundsrate

based onlaggedcore

inflation



estimates

Upperbound of

70%confidence

interval

Upperbound of

90%confidence

interval

1992:Q2 -0.38 0.65 1.54 0.25 ND 3.32 3.96 4.87

1992:Q3 -0.44 0.50 1.61 -0.02 ND 3.20 3.80 4.76

1992:Q4 -0.28 0.67 1.79 0.00 ND 2.99 3.77 4.64

1993:Q1 -0.48 0.50 1.38 0.38 ND 2.92 3.69 4.59

1993:Q2 -0.65 0.33 1.30 0.29 ND 2.70 3.45 4.35

1993:Q3 -0.67 0.24 1.35 0.59 ND 2.19 3.25 4.08

1993:Q4 -0.39 0.51 1.71 0.72 ND 2.35 3.48 4.33

1994:Q1 -0.24 0.69 1.86 1.03 ND 2.87 3.75 4.61

1994:Q2 -0.10 0.80 2.00 1.84 ND 2.49 3.71 4.55

1994:Q3 -0.33 0.56 1.80 2.06 ND 2.39 3.50 4.37

1994:Q4 -0.36 0.53 1.54 2.74 ND 2.64 3.59 4.47

1995:Q1 -0.18 0.77 1.75 3.37 ND 2.86 3.82 4.66

1995:Q2 -0.45 0.50 1.50 3.69 ND 2.53 3.52 4.35

1995:Q3 -0.18 0.81 1.69 3.76 ND 2.81 3.85 4.69

1995:Q4 -0.14 0.83 1.79 3.68 ND 2.77 3.84 4.69

1996:Q1 -0.17 0.75 1.79 3.38 ND 2.82 3.75 4.59

1996:Q2 0.34 1.24 2.28 3.39 ND 3.16 4.23 5.10

1996:Q3 0.35 1.34 2.20 3.53 ND 3.73 4.49 5.36

1996:Q4 0.42 1.37 2.30 3.46 ND 3.60 4.47 5.32

1997:Q1 0.36 1.33 2.25 3.54 ND 3.78 4.52 5.43

1997:Q2 0.71 1.62 2.57 3.76 ND 3.44 4.62 5.47

1997:Q3 0.96 1.93 2.72 3.97 4.11 4.25 5.07 5.95

1997:Q4 0.80 1.81 2.56 4.16 4.30 4.94 5.43 6.42

1998:Q1 0.80 1.80 2.65 4.20 4.33 3.97 4.90 5.76

1998:Q2 0.75 1.73 2.53 4.34 4.16 4.01 4.91 5.78

1998:Q3 0.65 1.59 2.67 4.23 4.30 4.36 4.94 5.90

1998:Q4 0.79 1.71 2.65 3.44 3.47 4.12 4.86 5.78

1999:Q1 0.93 1.90 2.97 3.36 3.90 4.81 5.32 6.34

1999:Q2 1.01 2.04 2.79 3.23 4.08 4.92 5.48 6.48

Period

Lowerbound of

90%confidence

interval

Lowerbound of

70%confidence

interval


estimates

Theactual

real fundsrate

based onlaggedcore

inflation



estimates

Upperbound of

70%confidence

interval

Upperbound of

90%confidence

interval

1999:Q3 1.13 2.15 2.93 3.59 4.29 5.09 5.61 6.58

1999:Q4 1.52 2.53 3.30 3.77 4.37 4.60 5.68 6.52

2000:Q1 1.16 2.28 2.87 3.84 5.26 4.60 5.59 6.47

2000:Q2 1.33 2.23 3.17 4.54 5.63 4.04 5.23 6.08

2000:Q3 0.92 1.99 2.61 4.92 5.24 4.80 5.42 6.34

2000:Q4 0.66 1.62 2.48 4.96 4.55 3.95 4.78 5.65

2001:Q1 0.09 1.07 2.19 3.99 3.10 3.88 4.45 5.40

2001:Q2 0.11 0.98 2.22 2.52 1.94 2.97 3.95 4.83

2001:Q3 -0.55 0.39 1.34 1.57 1.72 2.75 3.56 4.46

2001:Q4 -0.70 0.18 1.14 -0.07 0.51 2.06 3.19 4.09

2002:Q1 -0.37 0.49 1.53 -0.09 0.66 2.37 3.47 4.34

2002:Q2 -0.72 0.18 1.08 -0.02 0.54 2.25 3.25 4.15

2002:Q3 -1.69 -0.68 -0.25 -0.13 0.29 1.86 2.90 3.86

2002:Q4 -1.90 -0.90 -0.40 -0.10 -0.01 1.87 2.79 3.74

2003:Q1 -1.73 -0.73 -0.21 -0.25 0.33 2.61 3.22 4.18

2003:Q2 -1.04 -0.09 0.66 -0.11 0.44 2.61 3.31 4.26

2003:Q3 -0.39 0.51 1.41 -0.32 0.03 2.61 3.61 4.51

2003:Q4 -0.17 0.71 1.95 -0.44 0.18 2.61 3.67 4.53

2004:Q1 -0.29 0.59 1.73 -0.75 0.48 2.59 3.60 4.48

2004:Q2 -0.20 0.68 1.70 -1.08 0.67 2.82 3.74 4.65

2004:Q3 -0.39 0.53 1.37 -0.65 0.90 2.58 3.63 4.55

2004:Q4 -0.39 0.48 1.62 -0.26 1.29 2.16 3.42 4.31

2005:Q1 -0.24 0.62 1.67 0.22 1.88 2.51 3.58 4.45

2005:Q2 -0.34 0.52 1.44 0.84 1.44 2.53 3.56 4.47

2005:Q3 -0.19 0.66 1.74 1.37 1.78 2.37 3.63 4.53

2005:Q4 -0.26 0.62 1.55 1.83 2.16 2.72 3.68 4.60

2006:Q1 -0.13 0.73 1.89 2.44 2.61 2.40 3.69 4.58

2006:Q2 -0.11 0.82 1.79 2.69 2.57 2.93 3.91 4.77

2006:Q3 -0.23 0.70 1.75 2.87 2.61 2.74 3.72 4.59

Period

Lowerbound of

90%confidence

interval

Lowerbound of

70%confidence

interval


estimates

Theactual

real fundsrate

based onlaggedcore

inflation



estimates

Upperbound of

70%confidence

interval

Upperbound of

90%confidence

interval

2006:Q4 -0.29 0.56 1.78 2.98 2.80 2.16 3.48 4.37

2007:Q1 -0.53 0.32 1.56 2.90 2.96 1.99 3.22 4.12

2007:Q2 -0.50 0.34 1.53 3.27 3.22 2.22 3.28 4.19

2007:Q3 -0.15 0.73 1.60 3.17 3.08 2.74 3.84 4.73

2007:Q4 -0.86 0.17 0.68 2.44 2.52 3.24 3.94 4.89

2008:Q1 -2.31 -1.16 -0.94 1.18 0.17 2.73 3.53 4.51

2008:Q2 -2.20 -1.24 -0.64 -0.15 -0.07 2.19 2.61 3.84

Bottom panelShort-Run and Medium-Run Measures

Current EstimatePreviousBluebook

Short-Run Measures

1. Single-equation model 2.2 2.1

2. Small structural model -0.6 -0.8

3. Large model (FRB/US) 0.4 0.3

Confidence intervals for three model-based estimates

4a. 70 percent confidence interval -1.2 - 2.6

4b. 90 percent confidence interval -2.2 - 3.8

5. Greenbook-consistent measure -0.1 -0.5

Medium-Run Measures

6. Single-equation model 2.2 2.2

7. Small structural model 1.8 1.7

Confidence intervals for two model-based estimates

8a. 70 percent confidence interval 1.1 - 2.9

8b. 90 percent confidence interval 0.5 - 3.7

9. TIPS-based factor model 2.0 2.0

Measures of Actual Real Federal Funds Rate

10. Based on lagged core inflation -0.2 0.1

11. Based on lagged headline inflation -1.3 -1.1*

12. Based on Greenbook projection of headline inflation -1.3 -0.7*

* This measure was not reported in the April Bluebook. Return to table

Note: Appendix A provides background information regarding the construction of these measures and confidence intervals.

Appendix 5: Materials used by Messrs. Angulo, Alvarez, and Parkinson

Material for Supervisory Report Concerning Investment Banks and Related Policy IssuesJune 25, 2008


Primary Dealer Monitoring Update

June 25, 2008Federal Reserve Bank of New York

Page 2Presentation Overview

Objectives and ApproachCurrent Focus at Four Investment Banks

CapitalLiquidity

PDCF (and TSLF) UsageNear-Term Issues

Page 3Objectives

Tied closely to Primary Dealer Credit Facility (PDCF) and FRA 13(3) authorityBuild the capability to exercise informed judgment about the capital and liquidity positions ofthe primary dealers given their access to the PDCFMinimize the risk that the availability of financing under the PDCF undermines the incentivesfor primary dealers to manage capital and liquidity more conservatively

Page 4Approach

Focus is on the firms that own primary dealers not affiliated with financial holding companies-- primarily the four largest investment banks.

Limited on-site presence + off-site staffDirect contact with managementInformation sharing and communication with SEC…but we are not engaged in traditional bank supervisionCurrent focus at the four investment banks is on capital and liquidity

Capital - increasing (but not sole) focus on risk-based capital (RBC)Liquidity - iterative approach

Page 5Leverage Trend as Reported by the Firms

Gross Leverage

A line chart plots gross leverage data for Goldman Sachs, Morgan Stanley, Merrill Lynch, andLehman Brothers on a quarterly basis from 2003:Q4 through 2008:Q2. Unit is percent.

The Goldman Sachs series begins at about 5.4% in 2003:Q4, decreases fairly steadily to about 3.8 by2006:Q1, increases to about 4.2 by 2006:Q3, then fluctuates but generally decreases to about 3.6 by2008:Q1. The curve then increases to end at about 4.1% in 2008:Q2.

The Morgan Stanley series begins at about 4.4% in 2003:Q4, decreases fairly steadily to about 3.2 by2006:Q2, then fluctuates between about 3.1 and 3.4 through 2007:Q4. The curve then increases toend at about 4.0% in 2008:Q2.

The Merrill Lynch series begins at about 6.4% in 2003:Q4, decreases to about 5.4 by 2004:Q3,fluctuates around 5.5 through 2006:Q1, then decreases and fluctuates around 5.0 through 2006:Q4.The curve then decreases fairly steadily to about 3.6 by 2007:Q4, and increases to end at about 4.0%in 2008:Q1.

The Lehman Brothers series begins at about 4.2% in 2003:Q4, decreases to just over 4.0 by 2004:Q2,generally increases to about 4.3 by 2005:Q1, then gradually decreases to about 3.9 by 2006:Q3. Thecurve dips to about 3.3 by 2006:Q4, increases to about 3.6 by 2007:Q2, decreases to about 3.3 by2008:Q1, then increases quickly to end at about 4.1% in 2008:Q2.

Page 6Capital - Current View

Left panelTier 1 Capital Ratios: 4 Largest Securities Firms

A bar chart. Approximate values are as follows.

Percent

March 2008 April 2008 Est. May 2008

Goldman Sachs 9.70 10.20 10.80

Lehman Brothers* 10.00 10.70 10.50

Merrill Lynch 6.65 7.05 ND

Morgan Stanley 12.20 12.10 11.75

* Note: For May this ratio would be 12.5% with June capital raise included Return to table

Right panelComparison of FRBNY Adjusted Leverage Ratios*

A bar chart. Approximate values are as follows.

Percent

2007:Q1 2008:Q1

GS 5.4 4.8

LEH 5.2 5.0

MER 6.7 4.6

MS 4.8 4.2

2007:Q1 2008:Q1

BAC 5.1 4.8

C 5.0 3.9

JPM 6.1 5.9

WFC 7.6 6.1

WB 4.4 4.3

* Note: FRBNY Leverage Ratio = Tangible Equity / Total Assets less Secured Financing Assets and Intangible Assets Returnto text

Page 7Recent Trend in Parent Company Liquidity Pools

Top-left panelGoldman Liquidity Pool Trend

A line chart plots the Goldman Sachs liquidity pool trend from March 14 through June 18, 2008. Thecurve begins at about $77 billion, decreases to about 65 by March 27, increases to about 108 by May12, decreases to about 90 by May 19, then generally increases to end at about $100 billion.

Top-right panelMorgan Liquidity Pool Trend

A line chart plots the Morgan Stanley liquidity pool trend from March 14 through June 19, 2008. Thecurve begins at about $77 billion, decreases to about 47 by March 25, increases to about 79 by April11, fluctuates around 75 through May 7, and fluctuates around 80 for the remainder of the period,ending at about $78 billion.

Bottom-left panelMerrill Liquidity Pool Trend

A line chart plots the Merrill Lynch liquidity pool trend from March 17 through June 19, 2008. Thecurve begins at about $39 billion, dips to about 33 by March 19, increases to about 60 by March 28,fluctuates around 55 through April 28, fluctuates around 61 through May 23, and fluctuates around67 for the remainder of the period, ending at about $66 billion.

Bottom-right panelLehman Liquidity Pool Trend

A line chart plots the Lehman Brothers liquidity pool trend from March 14 through June 18, 2008.The curve begins at about $30 billion, remains around that level through April 28, generallyincreases to about 45 by June 3, then fluctuates around that level and ends at about $42 billion.

Page 8Liquidity Stress Approach

Left panel

As of dates: 5/22/08 - 6/10/08 Severity Assumption

UNSECURED FUNDING - Percent not rolling

Total Unsecured Funding 100%

SECURED FUNDING - Percent not rolling

As of dates: 5/22/08 - 6/10/08 Severity Assumption

Fixed Income Finance

OMO Eligible 0%

Liquid 20%

Less Liquid 50%

Illiquid 100%

Equity Finance

Liquid 20%

Less Liquid 50%

ON-BOARDING AND OTHER COMMITMENTS

Off-Balance Sheet Assets On-Boarded Institution Specific

Loan Commitments/Other Contractual Uses Institution Specific

Other Liabilities/Commitments Institution Specific

OPERATING CASH FLOWS

Prime Brokerage, Withdrawal of Free Credits 50%

Customer Shorts with Liquidity Risk 11%

Release of Lockup Cash Flows 90% - 100%

Collateral and Margin Calls: Payments / Receipts 100% / 90%

Derivatives / Margin Mismatches: Payments / Receipts 100% / 90%

ADDITIONAL FUNDING

Affiliated Banks / Unaffiliated Bank Lines / Other Institution Specific

Right panel

Iterate with the 4 firmsCurrent scenario:

Severe stress but short of full Bear Stearns scenario30 day liquidity horizonNO access to the PDCF

Compare and converge assumptionsConstruct cash flow analysisRelate cash needs under stress to available liquidity (liquidity pool + additional fundingsources)

Page 9PDCF Usage

Bear Stearns has been by far the largest and most regular borrowerUntil very recently, there were 3 other "chronic" users

Cantor FitzgeraldCountrywide SecuritiesBarclays Capital

Page 10

TSLF Usage - Schedule 1

Dealer Evolution of Top 5* Schedule 1 Awards: Total Amounts Outstanding

A line chart plots total amounts outstanding on total Schedule 1 Term Securities Lending Facilityawards for Deutsche, BNP Paribas, Citigroup, Merrill Lynch, and Barclays Capital, and the Averageexcluding these top five, on a biweekly basis from April 3 through June 12, 2008. Unit is billions ofdollars.

The Deutsche curve begins at about $10 billion on April 17, and stays at that level for the remainderof the period.

The BNP Paribas curve begins at about $5 billion, increases to about 10 by April 17, decreases fairlysteadily to zero by May 29, then increases to end at about $4.3 billion.

The Citigroup curve begins at about $4.6 billion, increases to about 5.2 by May 1, decreases to about5 by May 15, remains at that level until May 29, then increases to end at about $5.9 billion.

The Merrill Lynch curve begins at about $4.0 billion, increases to about 6.1 by May 1, decreases toabout 5 by May 15, then decreases to zero by May 29 and stays at that level for the remainder of theperiod.

The Barclays Capital curve begins at about $0.5 billion, increases to about 2.6 by April 17, increasesfurther to about 3.5 by May 1, decreases to about 2.3 by May 15, increases to about 4.2 by May 29,and decreases to end at about $3.5 billion.

The Average curve begins at about $0.5 billion, increases to about 1.2 by April 17, remains at thatlevel through May 1, decreases to about 0.5 by May 15, decreases slightly further to about 0.3 byMay 29, and increases to end at about $1.3 billion on June 12, 2008.

* Based on total Schedule 1 TSLF awards Return to text

Page 11TSLF Usage - Schedule 2

Dealer Evolution of Top 5* Schedule 2 Awards: Total Amounts Outstanding

A line chart plots total amounts outstanding on total Schedule 2 Term Securities Lending Facilityawards for UBS, Lehman Brothers, Merrill Lynch, Deutsche, Citigroup, Goldman Sachs, and theAverage excluding these "top five", on a biweekly basis from March 27 through June 19, 2008. Unitis billions of dollars.

The UBS curve begins at about $15 billion, remains at that level through April 24, increases to about19 by May 8, then decreases to end at about $4 billion.

The Lehman Brothers curve begins at about $8 billion, increases to about 11 by April 10, remains atthat level through April 24, then gradually decreases to end at about $8 billion.

The Merrill Lynch curve begins at about $10 billion, increases to about 13 by April 10, decreases toabout 8 by April 24, increases to about 9 by May 8, then decreases to about $8 billion by May 22 andstays at that level for the remainder of the period.

The Deutsche curve begins at about $6 billion, increases to about 10.5 by April 24, decreases toabout 7 by May 22, then increases to end at about $9 billion.

The Citigroup curve begins at about $1 billion, increases to about 11 by April 24, stays at that level

until May 8, decreases to about $7.5 billion by June 5, and stays at the level for the remainder of theperiod.

The Goldman Sachs curve begins at about $7 billion, increases to about 11 by April 10, decreases toabout 8 by April 24, decreases further to about 6 by May 22, stays at that level through June 5, thenincreases to end at about $7 billion.

The Average curve begins at about $2 billion, increases to slightly more than 3 by April 10, graduallydecreases to about $1.5 billion by May 22, and stays at about that level for the remainder of theperiod.

* Based on total Schedule 2 TSLF awards; Citigroup and Goldman are tied for fifth Return to text

Page 12Near-Term Issues

For how much longer should our monitoring program continue with its current focus in itscurrent form?How do we limit the reputational risk to the Federal Reserve that increases with the length ofour onsite presence at the investment banks?If our monitoring program needs to evolve, in which areas should we alter the depth and/orbreadth of our activities?

Page 13Primary Dealers

Dealer

(in billions of dollars)

RegulatorsTotal Assets

LegalEntity

(1)

Consolidated

(2)

Tri-party RepoCollateral

(3)

LegalEntity

(4)

Consolidated

(5)

1. Goldman Sachs 705 1,189 117 SEC CSE/SEC

2. Deutsche Bank Securities 574 3,642 366 SEC FHC/FRS

3. Morgan Stanley 568 1,091 129 SEC CSE/SEC

4. Lehman Brothers 488 786 147 SEC CSE/SEC

5. UBS Securities 458 2,244 159 SEC FHC/FRS

6. Barclays Capital 439 2,451 237 SEC FHC/FRS

7. Citigroup Global Markets 354 2,200 154 SEC FHC/FRS

8. Credit Suisse Securities 336 1,215 170 SEC FHC/FRS

9. JP Morgan Securities 280 1,643 90 SEC FHC/FRS

10. Banc of America Securities 272 1,737 311 SEC FHC/FRS

11. BNP Paribas Securities 245 2,496 102 SEC FHC/FRS

12. Merrill Lynch Govt Securities 170 1,042 141 Treasury/SEC CSE/SEC

13. Greenwich Capital Mkts 150 3,795 58 SEC FHC/FRS

14. Bear Stearns 131 399 20 SEC CSE/SEC

1

2

3

3

Dealer

(in billions of dollars)

RegulatorsTotal Assets

LegalEntity

(1)

Consolidated

(2)

Tri-party RepoCollateral

(3)

LegalEntity

(4)

Consolidated

(5)

15. HSBC Securities USA 75 2,354 34 SEC FHC/FRS

16. Dresdner Kleinwort Wasserstein Securities 62 1,780 14 SEC FHC/FRS

17. Cantor Fitzgerald 31 29 NA SEC None

18. Daiwa Securities America 29 174 5 SEC Japan FSA

19. Countrywide Securities 24 199 12 SEC THC/OTS

20. Mizuho Securities USA 23 1,374 12 SEC FHC/FRS

As of Q1 2008, except where noted. Return to table

Average for May 27 through June 6. In some cases includes collateral financed by affiliates of the primary dealer. Return totable

Q4 2007. Return to table

Pages 14-15Liquidity Facilities and the Prudential Supervision ofInvestment Banks and Other Primary DealersKey Issues for Discussion

Liquidity Facilities

When and under what circumstances should we decide to extend, modify, or eliminate ourcurrent credit facilities for primary dealers (PDCF and TSLF)? Should the timing andcircumstances differ for the two facilities?

1.

If we decide to eliminate one or both credit facilities, how should that be done? How muchnotice should be provided? Should the terms of credit extension be gradually tightened prior toclosing the facility, or should the facility be closed in one step? When notice is given, shouldwe give assurances that the closing of the facilities will be delayed if conditions in financialmarkets warrant?

2.

Should we seek legislation that would permit us to provide some type of liquidity backstop toprimary dealers in the longer term? Under what conditions should a primary dealer bepermitted to draw on such a backstop? What is the rationale for any such backstop?

3.

Prudential Supervision

How do we limit the moral hazard risk that our current credit facilities undermine theincentives for primary dealers and the holding companies that own them to manage liquidityand capital to appropriately conservative levels?

a. On what principles should supervisory expectations for investment banks' capital,liquidity, and risk management be based? Should these expectations be codified in aformal document? How?b. To what liquidity standard should the SEC-regulated investment banks be held? Is itappropriate to expect the firms to maintain liquidity sufficient to withstand a BearStearns-type scenario? Should bank-affiliated primary dealers (and their parentcompanies) be held to the same liquidity standard as investment banks?

1.

1

2

3

3

3

1

2

3

1

2

c. Should investment banks be held to the same capital standards as bank holdingcompanies? What about the leverage ratio?

In the longer term, can we rely on an MOU with the SEC to provide the prudential supervisionthat is necessary to limit moral hazard? Or is legislation needed to enhance the effectiveness ofprudential supervision of primary dealers? Is there a need for legislation only if we provideprimary dealers with an ongoing liquidity backstop or is legislation needed even if their accessis only in unusual and exigent circumstances?

2.

If legislation is needed, what type of legislation? Legislation requiring consolidatedsupervision of investment banks? By whom? Should the securities laws be amended to providethe SEC with explicit authority to conduct consolidated supervision of investment banks?Should all primary dealers and their affiliates be regulated as FHCs? Are changes to thefunctional regulation provisions of Gramm-Leach-Bliley needed to make effectiveconsolidated supervision of primary dealers that are part of FHCs?

3.

If we provide primary dealers with an ongoing liquidity backstop, do we need to alter thecriteria for becoming a primary dealer (which have worked well to define appropriatecounterparties for desk transactions) to require a primary dealer and its consolidatedorganization to be subject to effective prudential supervision?

4.

For purposes of this discussion an investment bank is a primary dealer whose consolidated supervisor is the SEC. Of thetwenty primary dealers, four (including Bear Stearns) are subsidiaries of investment bank holding companies subject toconsolidated supervision by the SEC, thirteen are subsidiaries of Financial Holding Companies (FHCs), one (Countrywide) isa subsidiary of a thrift holding company, and one (Cantor Fitzgerald) is not subject to consolidated supervision. Return to text

Under the SEC's program for consolidated supervision, investment banks are required to maintain liquidity pools at theparent company sufficient to meet expected cash outflows in specified stress scenarios. Those scenarios include the loss ofaccess to unsecured funding for an entire year. Return to text

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