National Economic Indicators February 29, 2016 Table of Contents GDP Table : Real Gross Domestic Product Real Gross Domestic Product Decomposition of Real Gross Domestic Product Households Retail Sales Disposable Personal Income and Expenditures Sales of Automobiles and Light Trucks Personal Saving Rate Household Net Worth Existing Single-Family Home Sales New Single-Family Home Sales Private Single-Family Housing Starts & Permits Private Multi-Family Housing Starts & Permits Business Investment Real Investment in Nonresidential Structures Real Private Construction Put in Place Real Nonresidential Fixed Investment Real Investment in Equipment Real Investment in Intellectual Property Trade Balance of International Trade Exchange Value of the USD Manufacturing Industrial Production Capacity Utilization Rate: Manufacturing Indexes of Manufacturing Activity Indexes of Non-Manufacturing Activity Table : ISM Business Survey Indexes Manufacturers' New Orders Core Capital Goods Business Inventory/Sales Ratios Release Date Latest Period Feb-26-2016 08:31 Q4-2015 Feb-26-2016 08:31 Q4-2015 Feb-26-2016 08:31 Q4-2015 Page 4 5 6 Feb-12-2016 08:30 Feb-26-2016 10:01 Feb-02-2016 14:29 Feb-26-2016 10:01 Dec-10-2015 12:05 Feb-23-2016 10:02 Feb-24-2016 10:00 Feb-17-2016 08:30 Feb-17-2016 08:30 Jan-2016 Jan-2016 Jan-2016 Jan-2016 Q3-2015 Jan-2016 Jan-2016 Jan-2016 Jan-2016 7 8 9 10 11 12 13 14 15 Feb-26-2016 08:31 Feb-01-2016 10:02 Feb-26-2016 08:31 Feb-26-2016 08:31 Feb-26-2016 08:31 Q4-2015 Dec-2015 Q4-2015 Q4-2015 Q4-2015 16 17 18 19 20 Feb-05-2016 08:30 Dec-2015 Feb-01-2016 10:11 Jan-2016 21 22 Feb-17-2016 09:16 Feb-17-2016 09:16 Feb-01-2016 10:02 Feb-03-2016 10:01 Feb-01-2016 10:02 Feb-25-2016 08:31 Feb-25-2016 08:31 Feb-12-2016 10:01 23 24 25 26 27 28 29 30 Jan-2016 Jan-2016 Jan-2016 Jan-2016 Jan-2016 Dec-2015 Dec-2015 Dec-2015 Table of Contents (continued) Labor Market Nonfarm Payroll Employment Unemployment Rate Measures Labor Market Flows Labor Force Participation Aggregate Weekly Hours Index Average Hourly Earnings Employment Cost Index Business Labor Productivity Unit Labor Costs, Nonfarm Business Inflation Table : Gauges of Inflation Expenditure Price Indexes Consumer Price Indexes Producer Price Indexes Commodity Price Indexes Crude Oil Prices TIPS Inflation Compensation Monetary Policy & Financial Markets Federal Reserve System Assets Monetary Policy Instruments Real Federal Funds Rate FOMC Statement Eurodollar Futures SEP: Federal Funds Rate Monetary Base M2 Money Market Rates Capital Market Rates Treasury Yield Curve Risk Premium Release Date Feb-05-2016 08:32 Feb-05-2016 08:32 Feb-09-2016 10:01 Feb-05-2016 08:32 Feb-05-2016 08:32 Feb-05-2016 08:32 Jan-29-2016 08:32 Feb-04-2016 08:32 Feb-04-2016 08:32 Latest Period Jan-2016 Jan-2016 Dec-2015 Jan-2016 Jan-2016 Jan-2016 Q4-2015 Q4-2015 Q4-2015 Page 31, 32 33,34 35 36 37 38 39 40 41 Feb-03-2016 15:08 Feb-26-2016 10:01 Feb-19-2016 08:32 Jan-15-2016 08:33 Feb-03-2016 15:08 Feb-26-2016 Feb-23-2016 17:03 Jan-2016 Jan-2016 Jan-2016 Dec-2015 Jan-2016 26-Feb-2016 19-Feb-2016 42 43, 44 45 46 47 48 49 Feb-25-2016 16:32 Feb-25-2016 18:55 Feb-26-2016 10:01 Jan-27-2016 Feb-26-2016 Dec-16-2015 14:29 Feb-25-2016 16:31 Feb-25-2016 16:33 Feb-25-2016 18:55 Feb-25-2016 18:55 Feb-25-2016 16:20 Feb-25-2016 18:55 24-Feb-2016 19-Feb-2016 Jan-2016 50 51 52 53, 54 55 56 57 58 59 60 61 62 26-Feb-2016 17-Feb-2016 Jan-2016 19-Feb-2016 19-Feb-2016 19-Feb-2016 19-Feb-2016 Real Gross Domestic Product 2015 2014 Change from previous quarter at compound annual rate, % Gross Domestic Product Q4 Q1 Q2 Q3 Q4 2.1 0.6 3.9 2.0 1.0 4.3 1.8 3.6 3.0 2.0 Nonresidential Fixed Investment Structures Equipment Intellectual Property Products 0.7 4.3 -4.9 6.9 1.6 -7.4 2.3 7.4 4.1 6.2 0.3 8.3 2.6 -7.2 9.9 -0.8 -1.9 -6.6 -1.8 1.3 Residential Fixed Investment 10.0 10.1 9.3 8.2 8.0 Exports of Goods & Services Imports of Goods & Services 5.4 10.3 -6.0 7.1 5.1 3.0 0.7 2.3 -2.7 -0.6 Government Consumption Expenditures & Gross Investment -1.4 -0.1 2.6 1.8 -0.1 3.0 1.7 3.7 2.9 1.4 78.2 112.8 113.5 85.5 81.7 -463.6 -541.2 -534.6 -546.1 -556.8 Personal Consumption Expenditures Final Sales to Domestic Purchasers Billions of chained (2009) dollars Change in Private Inventories Net Exports of Goods & Services Source: Bureau of Economic Analysis via Haver Analytics 4 Real Gross Domestic Product 6 Percent change from previous quarter at annual rate 6 5 5 4 FOMC Projection 3 4 3 2 2 Q4 1.0% 1 1 0 0 -1 -1 -2 -2 -3 -3 -4 -4 -5 -5 -6 -6 -7 -7 -8 -8 -9 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 -9 Note: Projection is the median, central tendency, and range from the December 2015 Summary of Economic Projections. Red dots indicate median projections. Projections of change in real gross domestic product (GDP) are from the fourth quarter of the previous year to the fourth quarter of the year indicated. Source: Bureau of Economic Analysis via Haver Analytics & Federal Reserve Board 5 Decomposition of Real GDP 5 10-year annual growth rates 5 4.5 4.5 4 GDP 4 3.5 3.5 3 3 2.5 2.5 Productivity 2 2 1.5 1.5 1 1 HH Employment 0.5 0.5 0 1958 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 0 Note: Productivity is calculated as real GDP per employee, from the Household Survey. Source: Bureau of Economic Analysis via Haver Analytics 6 Retail Sales 16 12 Month % Change 16 14 14 3 Month Annualized % Change 12 10 12 10 8 8 6 6 4 4 January 3.4% 2 2 0 0 -2 -2 -4 -4 -6 -6 -8 Month over Month % Change -10 Overall Core -12 -14 2007 2008 2009 2010 2011 2012 2013 2014 2015 Nov. Dec. Jan. 0.3 0.2 0.2 0.5 0.2 0.4 2016 -8 -10 -12 -14 2017 Note: Retail sales includes food services. Source: Census Bureau via Haver Analytics 7 Disposable Personal Income & Expenditures 6 12 Month % Change 6 5 5 Real Disposable Personal Income 4 4 3 3 January 2 2 1 1 0 0 Real Personal Consumption Expenditure -1 -1 -2 November December Income 0.1 0.4 Expenditures 0.3 0.2 -3 -4 2007 -2 Month over Month % Change 2008 2009 2010 2011 2012 2013 2014 2015 January 0.4 0.4 2016 -3 -4 2017 Note: Real disposable personal Income was adjusted to remove tax-induced income shifting near end of 2012. Source: Bureau of Economic Analysis via Haver Analytics 8 Sales of Automobiles & Light Trucks 20 Millions of Vehicles 20 18 Autos and Light Trucks January 17.58 mil. 18 16 16 14 14 12 12 Light Trucks 10 10 8 8 Autos 6 6 4 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 4 2017 Source: Autodata Corporation via Haver Analytics 9 Personal Saving Rate 10 Percent of disposable personal income 10 9 9 8 8 7 7 6 6 January 5.2% 5 5 4 4 3 3 2 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2 2017 Note: The personal saving rate was adjusted to remove tax-induced income shifting near the end of 2012. Source: Bureau of Economic Analysis via Haver Analytics 10 Household Net Worth 700 650 Percent of disposable personal income 700 Q3. 650 600 600 550 550 500 500 450 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 450 Source: Z.1 Financial Accounts of the United States via Haver Analytics 11 Existing Single-Family Home Sales 6.5 Millions of Homes 6.5 6 6 5.5 5.5 January 4.86 mil. 5 4.5 4.5 4 3.5 3 5 Average Annual Existing Home Sales: 1990 through 1999 4 3.5 3 2.5 2.5 2000 2001 2002 2003 2004 2005 2006 2007 2008 20092010 2011 2012 2013 2014 2015 2016 2017 Source: National Association of Realtors via Haver Analytics 12 New Single-Family Home Sales 1.4 Millions of Homes 1.4 1.3 1.3 1.2 1.2 1.1 1.1 1.0 1.0 0.9 0.9 0.8 0.8 0.7 0.6 Average Annual New Home Sales:1990 through 1999 0.7 January .49 mil. 0.6 0.5 0.5 0.4 0.4 0.3 0.3 0.2 0.2 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Census Bureau via Haver Analytics 13 Private Single-Family Housing Starts & Permits 2.0 Millions of Starts & Permits 2.0 1.8 1.8 1.6 1.6 1.4 1.4 1.2 1.2 1990 - 1999 Average Housing Starts 1.0 1.0 Starts January 0.8 0.6 0.6 Permits 0.4 0.2 2000 0.8 0.4 0.2 2002 2004 2006 2008 2010 2012 2014 2016 Source: Census Bureau via Haver Analytics 14 Private Multi-Family Housing Starts & Permits 0.7 Millions of Starts & Permits 0.7 0.6 0.6 Permits 0.5 0.5 0.4 0.4 January 0.3 0.3 1990 – 1999 Average Multi-Family Starts 0.2 0.2 Starts 0.1 0.1 0.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Census Bureau via Haver Analytics 15 Real Investment in Nonresidential Structures 40 Percent change from previous quarter at annual rate 40 35 35 30 30 25 25 20 20 15 15 10 10 5 5 0 0 -5 -5 -10 -10 Q4 -6.6% -15 -15 -20 -20 -25 -25 -30 -30 -35 -35 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Bureau of Economic Analysis via Haver Analytics 16 Real Private Construction Put In Place 670 620 570 2009$, Billions 670 620 Real Private Residential Construction 570 520 520 470 470 420 Real Private Nonresidential Construction 420 December 370 370 320 320 270 270 220 220 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Notes: Private nonresidential construction deflated using the price index for private fixed investment in nonresidential structures and private residential construction deflated using the private residential investment chain price index. Source: Census Bureau via Haver Analytics 17 Real Nonresidential Fixed Investment 20 Percent change from previous quarter at annual rate 20 15 15 10 10 5 5 0 0 Q4 -1.9% -5 -5 -10 -10 -15 -15 -20 -20 -25 -25 -30 -30 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Bureau of Economic Analysis via Haver Analytics 18 Real Investment in Equipment 40 Percent change from previous quarter at annual rate 40 30 30 20 20 10 10 0 0 Q4 -1.8% -10 -10 -20 -20 -30 -30 -40 -40 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Bureau of Economic Analysis via Haver Analytics 19 Real Investment in Intellectual Property 12 Percent change from previous quarter at annual rate 12 10 10 8 8 6 6 4 4 Q4 1.3% 2 2 0 0 -2 -2 -4 -4 -6 -6 -8 -8 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Bureau of Economic Analysis via Haver Analytics 20 Balance of International Trade 0 Current $, Billions 0 Petroleum Balance -10 -10 -20 -20 -30 -40 December -43.36 Bil. Non-Petroleum Balance -30 -40 -50 -50 Trade Balance -60 -60 -70 -70 -80 -80 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Note: Customs Value of Trade Balance Source: Census Bureau via Haver Analytics 21 Exchange Value of the USD 135 Index, March 1973 = 100 135 125 125 115 115 105 January 105 95 95 85 85 75 1980 75 1984 1988 1992 1996 2000 2004 2008 2012 2016 Notes: Measured as the real broad trade-weighted exchange value of the United States Dollar. Source: Board of Governors via Haver Analytics 22 Industrial Production 140 2012 = 100 140 135 135 130 130 Mining 125 125 120 120 115 115 Overall 110 January 110 105 105 100 100 Manufacturing 95 95 90 90 85 85 80 80 75 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 75 2017 Source: Board of Governors via Haver Analytics 23 Capacity Utilization Rate: Manufacturing 82 Percent 82 80 80 78 78 January 77.1 76 76 74 74 72 72 70 70 68 68 66 66 64 64 62 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 62 2017 Source: Board of Governors via Haver Analytics 24 Indexes of Manufacturing Activity 65 Diffusion Index, percent 40 30 60 ISM (Left Axis) 20 55 10 January 48.2 50 -10 45 Richmond Fed (Right Axis) -20 40 35 2007 0 -30 -40 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Institute for Supply Management & Richmond Fed via Haver Analytics 25 Indexes of Non-Manufacturing Activity 65 Diffusion Index, percent 40 30 60 ISM (Left Axis) 20 January 53.5 55 50 0 Richmond Fed Service Sector Index: Revenues (Right Axis) 45 -10 -20 40 35 2007 10 -30 -40 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Institute for Supply Management & Richmond Fed via Haver Analytics 26 ISM: Business Survey Indexes MANUFACTURING BUSINESS: NON-MANUFACTURING BUSINESS: Dec. Jan. Dec. Jan. Purchasing Managers Index 48.0 48.2 Non-Manufacturing Index 55.8 53.5 Production 49.9 50.2 Business Activity 59.5 53.9 New Orders 48.8 51.5 New Orders 58.9 56.5 Employment 48.0 45.9 Employment 56.3 52.1 Supplier Deliveries 49.8 50.0 Supplier Deliveries 48.5 51.5 Inventories 43.5 43.5 Inventories 53.0 51.5 Prices 33.5 33.5 Prices 51.0 46.4 Backlog of Orders 41.0 43.0 Backlog of Orders 50.0 52.0 New Export Orders 51.0 47.0 New Export Orders 53.5 45.5 Imports 45.5 51.0 Imports 49.0 46.0 DIFFUSION INDEXES: Numbers above 50 percent indicate more favorable responses towards economic activity. Source: Institute for Supply Management via Haver Analytics 27 Manufacturers’ New Orders 600 Current $, Billions 600 550 550 500 500 December 450 450 400 400 Twelve-Month Moving Average 350 300 2007 350 2008 2009 2010 2011 2012 2013 2014 2015 2016 300 2017 Source: Census Bureau via Haver Analytics 28 Core Capital Goods 75 Current $, Billions 75 New Orders 70 January 70 65 65 Shipments 60 60 55 55 50 50 45 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 45 2017 Notes: Core capital goods are nondefense capital goods excluding aircraft. Source: Census Bureau via Haver Analytics 29 Business Inventory/Sales Ratio 1.7 Percent 1.7 1.6 1.6 Retailers 1.5 1.5 December 1.4 1.3 1.4 Total Business Manufacturers 1.2 1.1 2007 1.3 2008 2009 2010 1.2 2011 2012 2013 2014 2015 2016 1.1 2017 Source: Census Bureau via Haver Analytics 30 Nonfarm Payroll Employment 144 Millions of Persons January 143.29 mil. 144 142 142 140 140 138 138 136 136 134 134 132 132 130 130 128 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 128 2017 Source: Bureau of Labor Statistics via Haver Analytics 31 Nonfarm Payroll Employment 400 Quarterly average of monthly changes, thousands of persons 400 300 300 Q1 Average 200 200 100 100 0 0 -100 -100 -200 -200 -300 -300 -400 -400 Monthly Change Jan. 151 Dec. 262 Nov. 280 Oct. 295 Sep. 149 -500 -600 -700 -500 -600 -700 -800 -800 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Bureau of Labor Statistics via Haver Analytics 32 Unemployment Rate 11 Percent 11 10.5 10.5 10 10 9.5 9.5 9 9 8.5 8.5 8 8 7.5 7.5 7 7 6.5 6.5 6 January 4.9% 5.5 6 FOMC Projection 5.5 5 5 4.5 4 2008 4.5 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 4 2020 Notes: FOMC projection is the median, range, and central tendency for the Q4 levels, from the December 2015 meeting. Red dots indicate median projections Source: Bureau of Labor Statistics & Board of Governors via Haver Analytics 33 Measures of Labor Utilization 19 Percent 19 17 17 15 15 13 13 U6: U5 + Involuntarily Part-Time 11 11 9 January U5: U3 + Discouraged + Marginally Attached 7 5 3 1994 9 7 5 U3: Official Unemployment Rate 3 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: Bureau of Labor Statistics via Haver Analytics 34 Labor Market Flows 4.5 Percent 4.5 4 Hires Rate* December 4 3.5 3.5 3 3 2.5 2.5 Job Openings Rate** 2 2 1.5 1 2000 Quits Rate* 1.5 1 2002 2004 2006 2008 2010 2012 2014 2016 Note: *Percent of total employment. **Percent of total employment plus job openings. Source: JOLTS via Haver Analytics 35 Labor Force Participation 68 Percent of Population 68 67 67 66 66 65 65 64 64 63 63 62 January 62 61 61 60 60 59 59 58 58 57 57 1948 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 Source: Bureau of Labor Statistics via Haver Analytics 36 Aggregate Weekly Hours Index 106 Index, 2007 = 100 106 January 104 104 102 102 100 100 98 98 96 96 94 94 92 92 90 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 90 2017 Source: Bureau of Labor Statistics via Haver Analytics 37 Average Hourly Earnings 4 12 Month % Change Monthly % Change Jan. 0.5% Dec. 0.0% Nov. 0.2% Oct. 0.3% 3.5 3 3.5 3 January 2.54% 2.5 2.5 2 2 1.5 1 2007 4 1.5 2008 2009 2010 2011 2012 2013 2014 2015 2016 1 2017 Source: Bureau of Labor Statistics via Haver Analytics 38 Employment Cost Index 4 Year over Year % Change 4 3.5 3.5 Benefits Cost 3 3 2.5 2.5 Total Compensation Q4 2 2 1.5 Q4.2015 YoY % Change Total Comp. 2.0 Benefits Cost 1.7 Wages & Salaries 2.1 1 2007 2008 2009 1.5 Wages and Salaries 2010 2011 2012 2013 2014 2015 2016 1 2017 Source: Bureau of Labor Statistics via Haver Analytics 39 Labor Productivity, Nonfarm Business 6 Year over Year % Change Quarterly Change at Annual Rate Q4 15 Q3 15 Q2 15 Q1 15 5 4 -3.0% 2.1% 3.5% -1.1% 3 6 5 4 3 Post-War Average 2 2 Q4 0.3% 1 1 0 0 -1 -1 -2 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 -2 2017 Source: Bureau of Labor Statistics via Haver Analytics 40 Unit Labor Cost, Nonfarm Business 6 Year over Year % Change 6 5 5 4 Q4 2.8% 3 4 3 2 2 1 1 0 0 -1 -1 -2 -2 -3 -4 -5 -6 2007 Quarterly Change at Annual Rate Q4 15 Q3 15 Q2 15 Q1 15 -2.7% 2.6% 3.7% -1.3% 2008 -3 Alternate Series -4 -5 2009 2010 2011 2012 2013 2014 2015 2016 -6 2017 Notes: Alternate series is derived from the Employment Cost Index. Source: Bureau of Labor Statistics via Haver Analytics 41 Gauges of Inflation Expenditure Price Indexes [Percent Change from Previous Month at Annual Rate]: Dec. -0.8 1.0 Personal Consumption Expenditures Core (excludes Food and Energy) Consumer Price Indexes Dec. -1.3 1.9 Jan. 0.3 3.6 YoY % 1.4 2.2 [Percent Change from Previous Month at Annual Rate]: Dec. -8.9 3.2 -3.2 -34.1 Finished Goods Core (excludes Food and Energy) Core Intermediate Goods Crude Goods Spot Commodity Price Index YoY % 1.3 1.7 [Percent Change from Previous Month at Annual Rate]: All Items Core (excludes Food and Energy) Producer Price Indexes Jan. 1.2 3.2 Jan. -6.1 1.2 -6.2 -7.6 YoY % -1.4 1.6 -3.1 -17.8 [Percent Change from Previous Month]: Dec. -2.4 CRB Spot Commodity Price Index Jan. 2.3 YoY % -9.3 Notes: Core PCE Price Index includes expenditures on food services. Source: BEA, BLS, & Commodity Research Bureau via Haver Analytics 42 Personal Consumption Expenditure Price Index 5 12 Month % Change 5 4.5 4.5 4 4 3.5 3.5 3 FOMC Projection 2.5 2.5 2% Longer-run Target 2 2 1.5 1.5 1 1 January 1.3% 0.5 0.5 0 0 -0.5 -0.5 -1 -1 -1.5 2008 3 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 -1.5 2019 Notes: FOMC projection is the median, range, and central tendency for Q4/Q4 percent changes, from the December 2015 meeting. Red dots indicate median projections. Source: Bureau of Economic Analysis & Board of Governors via Haver Analytics 43 Core Personal Consumption Expenditure Price Index 5 12 Month % Change 5 4.5 4.5 4 4 3.5 3.5 3 3 FOMC Projection 2.5 2% Longer-run Target 2 2 1.5 1.5 January 1.7% 1 1 0.5 0.5 0 0 -0.5 -0.5 -1 -1 -1.5 2008 2.5 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 -1.5 2019 Notes: FOMC projection is the median, range, and central tendency for Q4/Q4 percent changes, from the December 2015 meeting. Red dots indicate median projections. Core PCE Price Index excludes expenditures on gasoline and food services. Source: Bureau of Economic Analysis & Board of Governors via Haver Analytics 44 Consumer Price Indexes 6 12 Month % Change 6 5 5 All Items 4 4 3 3 January 2 2 1 1 Core CPI 0 0 -1 -1 December CPI: All Items 0.7% Core CPI 2.1% -2 -3 2007 2008 2009 2010 2011 2012 2013 2014 2015 January 1.3% 2.2% 2016 -2 -3 2017 Source: Bureau of Labor Statistics via Haver Analytics 45 Producer Price Indexes 12 12 Month % Change 12 10 10 8 8 Core Finished Goods 6 6 4 January 4 2 2 0 0 -2 -2 All Finished Goods -4 -4 January (percent) All Finished Goods -1.4% Core Finished Goods 1.6% -6 -8 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 -6 -8 2017 Source: Bureau of Labor Statistics via Haver Analytics 46 Commodity Price Indexes 30 12 Month % Change 12 Month % Change 45 27 40 24 35 21 30 Commodity Research Bureau Spot Commodity Price Index (Right Axis) 18 15 12 25 20 15 9 10 6 5 3 0 0 January PPI Core Intermediate Goods (Left Axis) -3 -6 -9 -10 -15 -20 -12 -15 Price Indexes PPI Core Intermed. Goods CRBS Spot Commodities -18 -21 2007 -5 2008 2009 2010 2011 2012 2013 2014 December -3.6% -14.4% 2015 January -3.1% -9.3% 2016 -25 -30 -35 2017 Source: Bureau of Labor Statistics & Commodity Research Bureau via Haver Analytics 47 Crude Oil Prices 160 Current US$/Barrel 160 140 140 120 120 100 100 80 80 60 Spot Price 40 40 29-Feb-16 20 Futures Price 0 1994 60 20 0 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Notes: Spot and Futures Prices are for Brent Crude Oil. Source: Financial Times & New York Mercantile Exchange via Haver Analytics & Bloomberg 48 TIPS Inflation Compensation 3.5 Percent 3.5 3.0 3.0 2.5 2.5 5-Year 5 Years Ahead 2.0 2.0 1.5 1.5 February 19th 1.0 1.0 5-Year 0.5 0.5 0.0 0.0 -0.5 -0.5 2009 2010 2011 2012 2013 2014 2015 2016 Source: Board of Governors Research Series via Haver Analytics 49 Federal Reserve System Assets 5,000 $, Billions Total: $4,532 4,500 Agency Debt: $31 4,000 3,500 Agency MBS: $1,759 Total: $2,865 3,000 2,500 2,000 Miscellaneous: $281 Agency Debt: $87 Miscellaneous: $282 Agency MBS: $844 1,500 1,000 Treasury Securities: $2,461 Treasury Securities: $1,652 500 0 9/12/2012 2/24/2016 Note: Numbers may not add up due to rounding. Source: Board of Governors via Haver Analytics 50 Monetary Policy Instruments 7.0 Percent 7.0 6.5 6.5 6.0 6.0 5.5 5.5 5.0 5.0 4.5 4.5 4.0 4.0 3.5 3.5 3.0 3.0 Federal Funds Target Rate 2.5 2.5 2.0 2.0 1.5 1.5 Primary Credit Rate February 26th 1.0 0.5 0.0 Interest Rate Paid on Reserves 0.5 Federal Funds Rate Target Range 2005 2006 2007 2008 1.0 0.0 2009 2010 2011 2012 2013 2014 2015 2016 Source: Board of Governors via Haver Analytics 51 Real Federal Funds Rate 4 Percent 4 3 3 2 2 1 1 0 0 -1 -1 January -2 -2 -3 -3 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Note: The Real Federal Funds Rate is the difference between the effect Fed Funds rate and the lagged year-over-year change in the core PCE price index. Source: Bureau of Economic Analysis & Board of Governors via Haver Analytics 52 FOMC Statement January 27, 2016 Information received since the Federal Open Market Committee met in December suggests that labor market conditions improved further even as economic growth slowed late last year. Household spending and business fixed investment have been increasing at moderate rates in recent months, and the housing sector has improved further; however, net exports have been soft and inventory investment slowed. A range of recent labor market indicators, including strong job gains, points to some additional decline in underutilization of labor resources. Inflation has continued to run below the Committee's 2 percent longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation declined further; survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen. Inflation is expected to remain low in the near term, in part because of the further declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further. The Committee is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook. Given the economic outlook, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation. Source: Board of Governors 53 Continued… In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions. Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; James Bullard; Stanley Fischer; Esther L. George; Loretta J. Mester; Jerome H. Powell; Eric Rosengren; and Daniel K. Tarullo. January 27, 2016 Source: Board of Governors 54 Eurodollar Futures 3.5 Percent 3.5 3 3 January 26, 2016 2.5 2.5 2 2 1.5 1.5 February 29, 2016 1 1 0.5 0 2016 0.5 2017 2018 2019 2020 2021 2022 0 2023 Source: CME Group via Bloomberg 55 Summary of Economic Projections: Federal Funds Rate 5 Percent 5 4 4 3 3 2 2 1 1 0 2015 2016 2017 2018 Longer run 0 Note: Each dot in the chart represents the value of an FOMC participant’s judgment of the midpoint of the appropriate target range (or the appropriate target level) for the federal funds rate at the end of the calendar year. Projections made for the December 2015 meeting. Source: Board of Governors 56 Monetary Base 4500 Current $, Billions 4500 February 17th 4000 4000 3500 3500 3000 3000 2500 2500 2000 2000 1500 1500 1000 1000 500 500 0 2009 0 2010 2011 2012 2013 2014 2015 2016 Source: Board of Governors via Haver Analytics 57 M2 11 12 Month % Change 11 10 10 9 9 8 8 7 January 6.1% 7 6 6 5 5 4 4 3 3 2 2 1 1 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Board of Governors via Haver Analytics 58 Money Market Rates 1.50 Percent 1.50 1.25 1.25 February 26th 1.00 1.00 Primary Credit Rate 0.75 0.75 3-Month LIBOR 0.50 0.50 IOER 0.25 0.25 Federal Funds Rate 0.00 0.00 Fed Reverse Repo Rate on Treasuries 3-Month T-Bill -0.25 2009 -0.25 2010 2011 2012 2013 2014 2015 2016 Source: Board of Governors & Financial Times via Haver Analytics & Bloomberg 59 Capital Market Rates 10 Percent 10 9 9 8 8 7 7 30-Year Conventional Mortgage Rate Corporate BBB Bond Rate 6 6 5 February 26th 5 4 4 3 3 2 2 Corporate AAA Bond Rate 1 10-Year Treasury Bond Rate 0 0 2009 1 2010 2011 2012 2013 2014 2015 2016 Source: BofA Merrill Lynch & Board of Governors via Haver Analytics 60 Treasury Yield Curve 2.50 Percent 2.50 2.25 2.25 January 26, 2016 February 26, 2016 2.00 2.00 1.75 1.75 1.50 1.50 1.25 1.25 1.00 1.00 0.75 0.75 0.50 0.50 0.25 0.25 0.00 0.00 6M 2 Yrs 3 Yrs 5 Yrs Time to Maturity 7 Yrs 10 Yrs Source: Board of Governors via Haver Analytics 61 Risk Premium 8 Percent 8 7 7 6 6 5 5 4 4 February 26th 3 3 2 2 1 1 10 Year Rolling Average Risk Premium 0 2009 0 2010 2011 2012 2013 2014 2015 2016 Note: Risk Premium is defined as the difference in yields between BofA Merrill Lynch BBB and 10-year Treasury. Source: BofA Merrill Lynch & Board of Governors via Haver Analytics 62