bluebooks · August 11, 2003
Bluebook
Prefatory Note
The attached document represents the most complete and accurate version available
based on original copies culled from the files of the FOMC Secretariat at the Board
of Governors of the Federal Reserve System. This electronic document was created
through a comprehensive digitization process which included identifying the bestpreserved paper copies, scanning those copies, 1 and then making the scanned
versions text-searchable. 2 Though a stringent quality assurance process was
employed, some imperfections may remain.
Please note that some material may have been redacted from this document if that
material was received on a confidential basis. Redacted material is indicated by
occasional gaps in the text or by gray boxes around non-text content. All redacted
passages are exempt from disclosure under applicable provisions of the Freedom of
Information Act.
1
In some cases, original copies needed to be photocopied before being scanned into electronic
format. All scanned images were deskewed (to remove the effects of printer- and scanner-introduced
tilting) and lightly cleaned (to remove dark spots caused by staple holes, hole punches, and other
blemishes caused after initial printing).
2
A two-step process was used. An advanced optical character recognition computer program (OCR)
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Content last modified 5/28/2009.
Strictly Confidential (F.R.)
Class II – FOMC
August 7, 2003
MONETARY POLICY ALTERNATIVES
Recent Developments
(1)
Longer-term interest rates increased sharply over the intermeeting
period in sometimes volatile trading conditions, more than reversing the considerable
decline that occurred over the weeks following the May FOMC meeting. Some of
the backup took place in response to the FOMC’s decision in June to cut the
intended federal funds rate 25 basis points to 1 percent, as investors had placed
substantial odds on a larger move and were reportedly surprised that the
accompanying statement made no mention of unconventional monetary policy
measures (Chart 1).1 Longer-term rates continued to climb over much of the
remainder of the intermeeting period. Investors apparently interpreted the
Chairman’s monetary policy testimony, the release of FOMC members’ economic
projections, and incoming news on the economy and corporate earnings as signaling
that a rebound in economic growth was likely and that substantial further disinflation
would probably not materialize, thus obviating the need for further reductions in the
federal funds rate or unconventional policy measures. A large volume of hedging
activity by holders of mortgage-backed securities, and to a lesser extent a
deterioration in the outlook for the federal budget, likely amplified the upward
movement in bond rates. On net, the ten-year Treasury yield rose about 100 basis
points—the largest intermeeting advance in more than fifteen years. Judging from
yields on Treasury inflation-indexed securities, much of this increase represented a
1
The average effective federal funds rate for the intermeeting period was 1.02
percent. The Desk purchased $1.1 billion of Treasury bills from foreign official institutions
and did not purchase any Treasury coupon securities in the market. The outstanding amount
of long-term RPs decreased from $19 billion to $13 billion.
Chart 1
Interest Rate Developments
Treasury Yield Curve*
Treasury Yields*
Percent
8
8/7/2003
Day before FOMC meeting 6/24/2003
Percent
6
Daily
Two-Year Treasury
Ten-Year Treasury
5
6
4
3
4
2
2
1
0
1
3
5
7
10
20
30
Jan.
Feb.
Mar.
Maturity in Years
*Smoothed yield curve estimated from off-the-run Treasury
coupon securities.
June
July
*Par yields from the off-the-run Treasury yield curve.
150
Change in Treasury Yields*
Apr.
May
2003
Basis points
Inflation Compensation*
Percent
3.4
Daily
3.2
Over Next Five Years
From Five to Ten Years Ahead
3.0
100
2.8
2.6
2.4
50
2.2
2.0
1.8
0
1
2
3
5
7
Maturity in Years
10
20
Jan.
Feb.
Mar.
30
Apr.
May
2003
June
July
*Based on a comparison of an estimated TIIS yield curve to the nominal
off-the-run Treasury yield curve.
*Change since day before June FOMC meeting.
Expected Federal Funds Rates*
Percent
4.5
4.0
Implied Distribution of Federal Funds Rate
Five Months Ahead*
Percent
45
40
35
30
25
20
15
10
5
0
June 24, 2003
3.5
3.0
2.5
August 7, 2003
August 7, 2003
2.0
1.5
1.0
June 24, 2003
0.5
Aug. Dec.
2003
Apr.
Aug.
2004
Dec.
Apr.
Aug.
2005
Dec.
2006
*Estimates from federal funds and eurodollar futures, with an allowance
for term premia and other adjustments.
Note: Vertical lines indicate June 24, 2003.
0.25
0.50
0.75
1.00
1.25
1.50
1.75
2.00
2.25
*Estimates from options on eurodollar futures contracts, adjusted
to estimate expectations for the federal funds rate.
2
rise in real interest rates, although inflation compensation also moved appreciably
higher. The sizable fluctuations in interest rates were accompanied by a deterioration
in the liquidity of certain markets, although conditions have improved considerably
over the past few days (see the box entitled “Liquidity Conditions in Fixed-Income
Markets”).
(2)
Shorter-term Treasury yields rose by less than those on longer-term
issues, in part because the Chairman’s testimony helped anchor near-term
expectations for monetary policy. Investors appear nearly certain that the funds rate
target will be left unchanged at the upcoming FOMC meeting, and rates on money
market futures suggest that policy is expected to remain on hold until early 2004.2
However, the upward trajectory of policy expectations thereafter is now much steeper
than at the time of the last FOMC meeting, and quotes on options contracts imply
that the perceived odds of additional reductions in the federal funds rate have
declined substantially. The current low level of overnight interest rates has apparently
contributed to a large increase in the frequency of delivery failures of fixed-income
securities, although that step-up reportedly has not had significant adverse effects on
the functioning of markets as a whole (see the box entitled “Substantial Rise in Failsto-Deliver of Treasury and Other Securities”).
(3)
Despite the sharp rise in Treasury yields, broad equity indexes were
down only slightly, on net, over the intermeeting period (Chart 2). Equity prices were
supported by earnings reports for the second quarter that surpassed expectations,
strong profit forecasts for subsequent quarters, and increased confidence in economic
prospects. Investors showed particular interest in riskier stocks, with the Nasdaq and
Russell 2000 indexes outperforming the broader market. In addition, investors’
perceptions of credit risk appeared to diminish further over the intermeeting period.
2
By contrast, surveys indicate that market and business economists generally see a
more extended period during which the stance of monetary policy remains unchanged.
Chart 2
Financial Market Indicators
Stock Prices
Earnings-Price Ratio for S&P 500
and Ten-Year Treasury
Index(12/31/02=100)
140
Daily
Wilshire
Nasdaq
Percent
9
Monthly
8
Twelve-Month Forward E/P Ratio
130
7
6
120
5
4
110
3
100
2
Real Ten-Year Treasury Yield*
1
90
Jan.
Feb.
Mar.
Apr.
May
2003
June
Aug.
1993
1995
1997
1999
2001
2003
*End-of-month ten-year Treasury yield minus Philadelphia Fed ten-year expecte
inflation.
Higher-Tier Spreads*
Daily
July
Lower-Tier Spreads*
Basis Points
240 400
Ten-Year AA
Ten-Year A
1200
Daily
Ten-Year BBB (left scale)
Master II (right scale)
200 350
160
Basis Points
1000
300
800
250
120
200
600
80
150
40
Jan.
July
2000
Jan.
July
2001
Jan.
July
2002
Jan.
400
July
2003
Jan.
*Measured relative to the off-the-run Treasury yield curve.
Nominal Trade-Weighted Dollar
Exchange Rates
July
2000
Jan.
July
2001
Jan.
July
2002
Jan.
July
2003
*Measured relative to the off-the-run Treasury yield curve.
Ten-Year Foreign Government Bond Yields
Index(1/28/02 = 100)
120
Daily
Broad Index
Major Currencies Index
Other Important Trading Partners
3.0
Percent
5.5
Daily
Japan (left scale)
UK (right scale)
Germany (right scale)
2.5
110
5.0
2.0
4.5
1.5
4.0
1.0
3.5
0.5
3.0
100
90
80
0.0
Jan.
July
2000
Jan.
July
2001
Jan.
July
2002
Note: Vertical lines indicate June 24, 2003.
Jan.
July
2003
2.5
Jan.
Feb.
Mar.
Apr.
May
2003
June
July
3
Liquidity Conditions in Fixed-Income Markets
The sharp fluctuations in longer-term interest rates resulted in a notable deterioration in
the liquidity of fixed-income markets and a significant widening of yield spreads on swaps,
agencies, and mortgage-backed securities around the end of July, but conditions have
improved considerably in recent days (Chart 3). The difficulties were primarily associated
with the decline in mortgage prepayment risk and the resulting extension in the duration
of outstanding mortgage-backed securities (MBS) rather than elevated credit concerns.
Investors seeking to offset this increase in duration sold large volumes of Treasury
securities and entered into sizable quantities of interest rate swaps to pay fixed rates.
Dealers in the Treasury and swap markets at times had difficulty accommodating the
selling pressure, and they began to post wider bid-ask spreads to compensate for the risks
associated with the greater volatility of the market.
The deterioration in liquidity was particularly notable in the swap market, where bid-ask
spreads on ten-year swaps widened to as much as 10 basis points from a typical level of
1 basis point. The liquidity of Treasury securities held up better, but bid-ask spreads for
on-the-run issues still widened to ½ basis point from a usual level of ¼ basis point, and
market depth reportedly declined some. Investors paid a higher premium for the on-therun ten-year Treasury note relative to off-the-run issues, although that premium was not
outsized relative to those recorded in recent years. The erosion in liquidity also spilled
over to the markets for mortgage-backed and agency debt securities.
Spreads on intermediate- and long-term swaps relative to Treasury securities increased
sharply over the period. This widening was apparently driven by the magnitude of
hedging-related flows and the considerable deterioration in the liquidity of swaps rather
than any unusual concern about counterparties or heightened aversion to credit risk. To
date, little evidence has emerged that any major market participant has suffered losses
sufficient to threaten its viability, and credit default swap premiums do not indicate any
unusual concern about the health of financial firms more generally. Poor liquidity also
contributed to a widening of spreads on mortgage-backed securities over Treasuries
(adjusted for prepayment risk) and on agency debt issues, developments that may have
been exacerbated by market speculation that the European Central Bank and euro-area
national central banks were reducing their exposure to agency issues.
In recent days, liquidity has recovered substantially for many of these instruments,
although conditions have not fully returned to normal levels. Swap, agency, and MBS
spreads have also retraced much of their widening as liquidity has improved.
Chart 3
Market Functioning and Liquidity
Swap and Agency Spreads*
On-the-Run Premiums*
Basis Points
60
Daily
Ten-Year Agency Spread
Ten-Year Swap Spread
Percent
35
Daily
Five-Year Treasury
Ten-Year Treasury
50
30
25
40
20
30
15
20
10
5
10
Jan.
Feb.
Mar.
Apr.
May
2003
June
July
Jan.
*Measured relative to the off-the-run Treasury yield curve.
Feb.
Mar.
Apr.
May
2003
June
July
*Amount by which the on-the-run yield falls below the off-the-run
yield curve, adjusted for auction cycle effects.
Credit Default Swap Spreads for Selected
Financial Intermediaries
Basis Points
Fails to Deliver
80
Daily
Brokers/Dealers
Commercial Banks
$ Billions
800
Monthly
700
Treasury Securities
Agency Securities
Mortgage-Backed Securities
70
600
60
500
400
50
300
40
200
100
30
0
20
Jan.
Feb.
Mar.
Apr.
May
2003
June
July
Feb.
Nov. Aug.
1998
1999
May Jan.
Oct.
2000
2001
July
2002
Apr.
2003
Note: Last observation is average level through July 23.
Overnight Interest Rates
Securities Lending by the Federal Reserve*
$ Billions
Weekly
Percent
2.0
Daily
Federal Funds Target Rate
RP Rate for On-the-Run Ten-Year Treasury Note
3
1.8
1.6
1.4
1.2
2
1.0
0.8
0.6
1
0
1/03 1/24 2/14 3/07 3/28 4/18 5/09 5/30 6/20 7/11 8/01
2003
*Average daily volume for week ending on date shown.
Note: Vertical lines indicate June 24, 2003.
0.4
0.2
0.0
Feb.
Mar.
Apr.
May
2003
June
July
4
Substantial Rise in Fails-to-Deliver of Treasury and Other Securities
Failures to deliver securities in the Treasury and other markets have risen substantially
since the last FOMC meeting (Chart 3). Fails in the Treasury market have been
particularly severe in the ten-year note maturing in May 2013, which, as the on-the-run
issue over most of the intermeeting period, was heavily used in hedging transactions.
However, fails have been elevated in other Treasury issues and in agency and mortgagebacked securities as well. Dealers have increasingly turned to the Federal Reserve’s
securities lending program to obtain securities that are difficult to acquire in the market.
A fail-to-deliver takes place when a party that has sold a security does not deliver the
security as agreed. In those circumstances, the market convention is to postpone the
settlement of the transaction without changing the price. During this intervening period,
the firm that was supposed to deliver the security loses the opportunity to earn interest on
the proceeds, because it does not receive these funds until the security is delivered.
A firm would presumably avoid failing if it were possible to obtain the security in a
repurchase agreement (RP) in which it was lending money at an above-zero interest rate,
rather than at the zero percent effective rate it earns if it fails to deliver. When there is
considerable demand in the market for a particular security, the rate at which firms are
willing to lend money against that issue will often move below the general level of
overnight interest rates—that is, the security goes “on special.” When the RP rate for a
given issue drops all the way to zero, the pecuniary incentive to deliver an issue on a timely
basis disappears. Indeed, the RP rate for the May 2013 note has been pinned at zero since
late June, coinciding with the high level of fails in that issue. By historical standards, it is
not unusual for the RP rate on the on-the-run ten-year note to be 100 basis points less
than the federal funds rate; however, this degree of “specialness” would not have
generated elevated fails if short-term interest rates had been higher.
Although the increase in fails has had adverse effects in the RP market for certain
Treasury issues, market participants report that it has not resulted in any significant
deterioration in the functioning and liquidity of fixed-income markets in general.† Going
forward, fails to deliver may stay elevated as long as short-term interest rates remain low.
However, recent increases in the size and frequency of auctions of Treasury securities may
help alleviate the volume of fails by increasing the supply of securities in the market.
____________________
†
The elevated level of fails has posed some relatively minor issues for the conduct of open
market operations. When foreign central bank customers do not receive securities that they
expected, their funds may remain at the Federal Reserve and thus result in a reserve drain.
Because of the increase in fails, reserve misses caused by errors in predicting foreign deposits
have increased somewhat.
5
Yield spreads on low-grade corporate bonds narrowed substantially, although they
have retraced some of that decline of late. Yields on high-grade corporate bonds, by
contrast, moved up roughly in line with those on Treasury securities, leaving their
spreads about unchanged.
(4)
The improved U.S. economic outlook and the increase in interest rates
helped buoy the dollar, which gained 1½ percent over the intermeeting period against
an index of currencies of major foreign trading partners. Better U.S. prospects also
spurred optimism about likely spillovers to the global economy, and tentative signs of
stronger growth were evident in some foreign countries as well. Yields on long-term
foreign government securities moved up sharply during the intermeeting period,
although by less than in the United States, and stock price indexes in many countries
firmed. The dollar recorded its largest gains—about 2½ percent—against the
Canadian dollar and sterling; in both cases, authorities surprised markets by easing
monetary policy, pointing to signs of lower inflation and weaker activity. Against the
euro, the dollar gained less—about 1 percent—as euro-area indicators of business
and consumer confidence improved and better earnings reports by euro-area firms
helped push up stock indexes in some major European countries. The dollar rose
only ¾ percent against the yen.3 Stock prices in Japan rose about 4 percent and yields
on long-term government bonds moved up 25 basis points amid some signs of
firming economic conditions.
(5)
The dollar rose slightly against an index of the currencies of our other
important trading partners. Stock prices in most Asian emerging markets recorded
solid gains, as investors were encouraged by confirmation that the SARS epidemic
3
. The Desk did not intervene during the period for the accounts of the System or
Treasury.
6
had waned and by improved prospects for global recovery. Toward the end of the
intermeeting period, however, rate increases and volatility in U.S. fixed-income
markets reverberated in some higher-risk foreign financial markets. Such spillovers,
together with worries about the pace of the Brazilian structural reform program,
caused the EMBI+ spread for Brazil to widen 90 basis points and the real to lose
nearly 5 percent versus the dollar.
(6)
Available indicators suggest that borrowing by U.S. nonfinancial firms
remained sluggish in July (Chart 4). Net corporate bond issuance slowed abruptly
from its robust pace of previous months, largely in response to the upswing in yields
on investment-grade bonds, while commercial paper rose for the first time in five
months. C&I loans continued to run off, even as banks reported in the Senior Loan
Officer Opinion Survey that they eased spreads and fees on those loans for the first
time since 1998.4 In the household sector, consumer credit grew at a moderate pace
in the second quarter, while mortgage debt expanded briskly, although a bit less so
than in previous quarters. More recently, applications for mortgage refinancing
dropped sharply in response to the sizable increase in mortgage rates. The Treasury
continued to borrow in large quantity: Federal debt expanded at a 24 percent pace on
a seasonally adjusted basis in the second quarter, and the Treasury announced that it
was raising its estimate of third-quarter borrowing needs substantially from the
forecast it made in late April. State and local governments also borrowed heavily in
the second quarter, but the pace of advance refundings fell off in July, presumably
reflecting the jump in interest rates. Overall, domestic nonfinancial sector debt is
estimated to have surged at a 10½ percent pace in the second quarter, with much of
that strength owing to government borrowing.
4
Data on C&I loans presented in this bluebook have been adjusted for the estimated
effects of FIN 46, which is a change in accounting rules that required financial institutions to
consolidate some “special purpose entities” onto their balance sheets.
Chart 4
Debt and Money Growth
Growth of Components of
Nonfinancial Business Debt
$Billions
Commercial Paper*
C&I Loans*
Bonds
Monthly rate
Total
Growth of Household Debt
Percent
50
18
Quarterly, s.a.a.r.
40
Consumer Credit
15
30
12
Q2e
20
9
10
e
6
0
Q2e
Home
Mortgage
-10
3
0
-20
2001
2002
J
F
M
A
M
J
J
2003
* Seasonally adjusted.
e Estimated.
Note. C&I loans are adjusted for the estimated effects of FIN 46.
Growth of Federal Debt
Percent
s.a.a.r.
-30
1992
1994
1996
1998
2000
2002
2004
e Estimated.
Growth of M2
Percent
40
35
e
-3
1990
21
s.a.a.r.
18
30
15
25
20
12
15
e
9
10
5
6
0
3
-5
2001
2002
J
F
M
A M
2003
J
-10
J
2001
2002
J
F
M
A M
2003
Note. Treasury debt held by the public at month-end.
e Estimated.
e Estimated.
M2 Opportunity Cost* and Velocity
Retail Taxable Money Fund
Yields and Bank MMDA Rates*
Percentage Points
M2 Velocity
J
0
J
Percent
7
2.3
8
Weekly
6
Velocity
(right scale)
4
2.2
Money Fund
5
2.1
2
4
Opportunity Cost
(left scale)
2.0
3
1
1.9
2
1.8
Bank MMDA
1
1.7
1993
1995
1997
*Two-quarter moving average.
1999
2001
2003
1996
1997
1998
1999
2000
2001
2002
*MMDA rates are simple averages of large bank rates.
Money funds yields are simple averages of yields at
all retail taxable funds.
2003
7
(7)
M2 expanded rapidly in June and July, propelled by the lagged effects of
past declines in the opportunity cost of holding money, measured as the yield on
three-month Treasury bills less the weighted average rate on the components of M2.
In addition, M2 was likely boosted by a surge in escrow accounts associated with the
high volume of mortgage refinancing activity and, perhaps, by the increases in
disposable incomes resulting from recent changes in tax law. Over the last two weeks
of July, households appear to have reduced their portfolios of bond mutual funds,
possibly in response to losses suffered during the sharp increase in long-term interest
rates, and some of those outflows were likely deposited into M2 accounts.
8
Policy Alternatives
(8)
The staff forecast prepared for this FOMC meeting continues to
anticipate a significant acceleration of economic activity over coming quarters, fueled
by the sizable degree of monetary accommodation already in place and considerable
fiscal stimulus—and perhaps evidenced by some recent economic data. The pickup
in growth next year, however, is noticeably less vigorous than that presented by the
staff in June, primarily reflecting the marked increase in longer-term interest rates, a
slight reduction in equity values, and the modest climb in the foreign exchange value
of the dollar since then. In the staff forecast, bond yields stay near their current
elevated levels until next spring, when they begin to drift lower as markets come to
recognize that economic conditions are such that the FOMC will be maintaining the
1 percent funds rate target for longer than had been expected. Stock prices are
predicted to rise sufficiently to generate risk-adjusted returns comparable to those on
fixed-income instruments, and the foreign exchange value of the dollar edges lower.
With economic growth a little slower than in the June Greenbook, slightly less
progress in reducing slack is foreseen over the next year and a half. In the fourth
quarter of 2004, the civilian unemployment rate is expected to be ½ percentage point
above the staff’s estimated NAIRU of 5 percent and the output gap is projected at ½
percent. After picking up slightly in coming months owing to the unwinding of some
factors that had damped it during the first half of the year, core PCE inflation is
projected to trend down gradually, reaching an average pace next year just under 1
percent. Overall PCE inflation is expected to run a touch lower than the core rate in
2004, reflecting falling energy prices.
(9)
Encouraged by recent data pointing to a firming of aggregate demand,
FOMC members may continue to see good odds on an acceleration of output over
the rest of this year and next year, in line with the contour of their economic
projections reported to the Congress in July. Such an outlook may prompt the
9
Committee to keep policy unchanged at this meeting. Even if policymakers would
prefer faster progress in boosting rates of resource utilization in the near term, they
might believe that, given the usual lags in the effects of policy, an easing now would
not significantly affect the economy until a brisk expansion likely was already
underway. Thus, the Committee might anticipate that, with a flat federal funds rate,
the projected outcomes for real activity, resource use, and inflation are about the best
that can be achieved. Moreover, Committee members might view the backup in
longer-term interest rates over the past few weeks in part as signaling that the
economy could be even stronger than forecast by the staff, reflecting a recent
fundamental improvement in business confidence and spending propensities (see the
box entitled “Changes in Yields and Revisions to Market Expectations for Economic
Activity”). The Committee might also continue to consider substantial further
disinflation to be unlikely. Core PCE inflation in the Greenbook moves down only a
little next year and, judging by the central tendencies of the inflation projections
reported in July, policymakers foresee even less disinflationary pressure than the staff.
With the risk of deflation apparently remote and the zero bound on the funds rate
still a full percentage point away, policymakers may prefer to keep policy on hold for
a time while assessing inflation trends and the strength of the pickup in economic
activity, including the response of spending to the additional tax cuts that have just
begun to show up in disposable income.
(10)
Even if the Committee believes that a pickup in economic growth is in
train, as in the staff forecast, it may prefer to take action to reduce resource slack
more quickly than in that outlook, and in the process diminish the risk of substantial
further disinflation, by easing 25 basis points at this meeting. The Committee
might view the downward revision to projected growth next year resulting from the
jump in bond
10
Changes in Yields and Revisions to Market Expectations for Economic Activity
The sharp backup in bond yields over the intermeeting period was associated with an
upward revision to investors’ expected path for the funds rate, presumably owing to a
change in their views of underlying economic strength or inflationary pressures. Under
the assumption that investors use a Taylor rule to formulate expectations for the funds
rate, it is possible to estimate the extent of those upward revisions. For the calculations
presented in this box, we also assumed that the market’s near-term forecasts for potential
GDP and its perceptions of the long-run equilibrium real funds rate and inflation
objective of the Federal Reserve—all of which appear in the Taylor rule—were
unchanged and that the term premiums in futures contract rates held constant.
Eurodollar futures rates for the fourth quarter of 2004 rose 0.9 percentage point over the
intermeeting period. Using a coefficient on the output gap in the Taylor rule of unity and
assuming that the market’s outlook for inflation was unchanged, the rise in futures
contracts would imply a comparable increase in the expected level of real GDP that
quarter of about 1 percent. This estimate is similar to one obtained using a simulation of
the FRB/US model.
The estimate would be altered if inflation expectations had changed appreciably over the
intermeeting period. Although some indicators of short-term inflation expectations edged
lower, five-year inflation compensation as measured by the difference between nominal
and inflation-indexed Treasury securities increased by about a percentage point. If
inflation expected by investors for the fourth quarter of 2004 also rose by that amount,
the Taylor rule would have implied an increase in expectations for the level of economic
activity at that time of only ½ percent rather than 1 percent.
These inferences from financial markets contrast with the 0.4 percent downward revision
to the Greenbook outlook for the level of real GDP in the fourth quarter of 2004. The
staff forecast can be interpreted as having assumed that the stronger outlook for economic
activity that investors have now adopted had already been built into the June Greenbook
projection. In consequence, the rise in interest rates had the effect of damping spending
in the current Greenbook.
rates as unacceptable and as warranting a prompt policy response. Also, the
Committee might believe that the trajectory of inflation in the Greenbook is too low
to provide a sufficient buffer against the zero bound on nominal interest rates in
coming years and might wish to foster a slightly higher path for inflation by easing
11
policy further. Alternatively, policymakers may anticipate that firms and households
will be more cautious about spending than the staff expects, perhaps along the lines
of the “prolonged subpar investment” or “weaker fiscal response” alternative
simulations in the Greenbook. Even apart from concerns about continued
sluggishness in aggregate demand, Committee members may have revised down their
inflation projections over the intermeeting period because of supply-side
considerations, such as productivity growth that has persistently come in on the high
side of expectations. In addition, short-term inflation expectations, as measured by
the Michigan survey, have edged lower of late, as have measures of actual core
consumer price inflation that sometimes are used as proxies for anticipated inflation,
and expectations seem likely to edge down further as actual inflation drifts lower. A
policy easing might be seen as desirable to prevent a rise in the real funds rate and,
perhaps, to move it back below the range of estimated equilibrium values (Chart 5).
(11)
Under either choice for the funds rate, the Committee might wish to
maintain the assessment of risks to the outlook adopted in June, despite some
significant changes in financial markets and in the staff forecast over the intermeeting
period. The Committee might see the risks to inflation as still tilted to the downside,
particularly given the low readings on actual inflation, the good news on productivity,
and the likely drag on aggregate demand growth from the recent jump in bond yields.
And even if policymakers’ expectations for real growth next year have been lowered
somewhat, as in the Greenbook, they probably remain consistent with a gradual
closing of the output gap, suggesting that the risks to attaining sustainable growth are
still roughly balanced.
(12)
Market participants apparently see almost no chance of a policy move
or shift in the FOMC’s assessment of risks at this meeting. Financial markets
therefore would tend to react little to a Committee decision that confirmed those
expectations, although the wording of the announcement could have a noticeable
Chart 5
Actual Real Federal Funds Rate and
Range of Estimated Equilibrium Real Rates
Percent
6
Quarterly
5
Actual Real Funds Rate
4
TIIS-Based Estimate
Historical Average: 2.66
(1966Q1-2003Q2)
3
2
1
●
●
Current Rate
25 b.p. Easing
0
-1
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Note: The shaded range represents the maximum and the minimum values each quarter of four estimates of the equilibrium
real federal funds rate based on a statistical filter and the FRB/US model. Real federal funds rates employ a four-quarter moving
average of core PCE inflation as a proxy for inflation expectations, with the staff projection used for 2003Q3.
Equilibrium Real Funds Rate Estimates (Percent)
2002
____
2003Q1
______
______
2003Q2
______
2003Q3
Statistical Filter
- Two-sided:
Based on historical data and the staff forecast
June Bluebook
0.3
0.2
0.3
0.4
0.4
0.4
0.5
--
- One-sided:
Based on historical data*
June Bluebook
0.7
-0.3
-0.3
-0.2
0.7
-0.6
-0.5
--
1.9
1.5
1.5
1.5
1.5
1.1
1.0
--
- One-sided:
Based on historical data**
June Bluebook
1.3
0.3
0.1
0.1
0.8
0.1
-0.2
--
Treasury Inflation-Indexed Securities
June Bluebook
3.5
3.0
2.9
3.2
3.5
3.1
3.0
--
FRB/US Model
- Two-sided:
Based on historical data and the staff forecast
June Bluebook
* Also employs the staff projection for the current and next quarters.
** Also employs the staff projection for the current quarter.
Note: Re-estimations since June of some long-term trends, including those for term premia, have boosted equilibrium real
rates in the FRB/US model over the historical period shown.
12
effect on market prices for a time. An announcement that emphasized the signs of
nascent strength in the economy and suggested little concern about the recent backup
in interest rates would tend to support the current higher levels of yields and the
foreign exchange value of the dollar. But a statement that underscored the
tentativeness of the pickup and alluded to the recent tightening of financial
conditions might lead to some easing of market interest rates and the exchange value
of the dollar. A 25-basis-point cut in the funds rate accompanied by maintenance of
the current risk assessment would surprise markets and likely induce a comparable
decline in short-term interest rates. To the extent that the move was seen as a
reaffirmation of an intent to keep the federal funds rate low for a considerable period
and, more particularly, as a reaction to the backup in longer-term yields, bond and
stock markets also might rally considerably.
(13)
M2 is projected to decelerate in the months ahead, but growth in that
aggregate over the second half of the year should remain considerably faster than that
of nominal GDP. The current wave of mortgage refinancings is likely to subside in
response to the recent sharp increases in longer-term interest rates, thereby damping
growth of the liquid deposits in which prepayments are temporarily held. However,
the lagged effect of past decreases in opportunity costs should continue to buoy this
monetary aggregate over the balance of this year. Under the Greenbook forecast, M2
is projected to grow around 8 percent over the four quarters of 2003, implying a
decline in its velocity of about 3¼ percent.
(14)
The debt of domestic nonfinancial sectors is also expected to decelerate
over the second half of the year. The growth of home mortgage debt is likely to slow
further from the vigorous pace set last year, while the expansion of consumer credit is
projected to stay fairly subdued. With the financing gap continuing to be modest as
increases in internal funds about keep pace with rising capital expenditures, business
borrowing should pick up only slightly. Federal borrowing will presumably remain
13
robust, though dropping back from its outsized second quarter pace. State and local
borrowing is forecast to decelerate sharply as advance refundings are scaled back
owing to higher interest rates. Over the four quarters of 2003, total domestic
nonfinancial sector debt is expected to grow 7¾ percent, with its nonfederal
component expanding 6¾ percent.
Alternative Growth Rates for M2
25 bp Ease
No Change*
Monthly Growth Rates
Jan-03
Feb-03
Mar-03
Apr-03
May-03
Jun-03
Jul-03
Aug-03
Sep-03
Oct-03
Nov-03
Dec-03
6.1
11.3
2.9
4.7
17.6
9.3
9.2
8.8
7.8
6.3
5.8
5.6
6.1
11.3
2.9
4.7
17.6
9.3
9.2
8.6
7.2
5.5
5.0
5.0
Quarterly Growth Rates
2002 Q4
2003 Q1
2003 Q2
2003 Q3
2003 Q4
7.0
6.5
8.5
10.0
6.8
7.0
6.5
8.5
9.9
6.1
6.8
8.2
6.8
8.0
8.4
8.5
8.0
8.4
8.5
7.8
8.9
9.0
6.9
6.4
8.9
8.9
6.3
5.7
Annual Growth Rates
2002
2003
Growth Rates
From
To
2002 Q4
Jul-03
2002 Q4
Aug-03
2002 Q4
Dec-03
Dec-02
Dec-02
Jul-03
Aug-03
Jul-03
Aug-03
Dec-03
Dec-03
* This forecast is consistent with nominal GDP and interest rates in the Greenbook forecast.
14
Directive and Risk-Assessment Language
(15)
Presented below for the members’ consideration is (1) draft wording for
the directive and (2) draft language to convey the substance of the risk assessment,
assuming that the Committee wishes to retain the current form of that assessment:
(1) Directive Wording
The Federal Open Market Committee seeks monetary and financial conditions that
will foster price stability and promote sustainable growth in output. To further its
long-run objectives, the Committee in the immediate future seeks conditions in
reserve markets consistent with MAINTAINING/INCREASING/reducing the
federal funds rate AT/to an average of around ___ percent.
(2) Risk Assessment
The Committee wishes to include in the official announcement to be released after
the meeting (but not to be included in the directive) the substance of the following
assessment:
Against the background of its long-run goals of price stability and
sustainable economic growth and of the information currently available:
The risks to its outlook for sustainable economic growth over the next
several quarters [ARE WEIGHTED TOWARD THE DOWNSIDE]
[are balanced] [ARE WEIGHTED TOWARD THE UPSIDE]; the
risks to its outlook for inflation over the next several quarters [are
weighted toward the downside] [ARE BALANCED] [ARE
WEIGHTED TOWARD THE UPSIDE]; and, taken together, the
balance of risks to its objectives [are weighted toward the downside]
[ARE BALANCED] [ARE WEIGHTED TOWARD THE UPSIDE]
in the foreseeable future.
SELECTED INTEREST RATES
(percent)
Short-term
Treasury bills
secondary market
Federal
funds
1
Long-term
CDs
secondary
market
Comm.
paper
Off-the-run Treasury yields
Indexed yields
Moody’s
Baa
Municipal
Bond
Buyer
Conventional home
mortgages
primary market
4-week
3-month
6-month
3-month
1-month
2-year
5-year
10-year
30-year
5-year
10-year
Fixed-rate
ARM
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
02 -- High
-- Low
1.92
1.15
1.82
1.07
1.88
1.16
2.16
1.23
1.98
1.31
1.81
1.26
3.75
1.59
4.99
2.72
5.73
3.94
6.04
4.85
3.33
1.54
3.56
2.19
8.23
7.30
5.67
5.02
7.18
5.93
5.26
4.01
03 -- High
-- Low
Monthly
Aug 02
Sep 02
Oct 02
Nov 02
Dec 02
1.45
0.86
1.26
0.79
1.22
0.81
1.28
0.82
1.32
0.93
1.28
0.91
1.91
1.09
3.37
2.06
4.70
3.29
5.53
4.37
1.84
0.77
2.48
1.56
7.48
6.01
5.42
4.78
6.34
5.21
4.06
3.45
1.74
1.75
1.75
1.34
1.24
1.68
1.67
1.62
1.26
1.20
1.65
1.66
1.61
1.25
1.21
1.64
1.64
1.59
1.30
1.27
1.73
1.76
1.73
1.39
1.34
1.72
1.73
1.72
1.34
1.31
2.12
1.98
1.92
1.94
1.84
3.37
3.01
3.02
3.13
3.09
4.54
4.16
4.25
4.33
4.31
5.27
4.97
5.13
5.16
5.12
2.04
1.74
1.86
1.99
1.90
2.55
2.30
2.44
2.49
2.46
7.58
7.40
7.73
7.62
7.45
5.30
5.10
5.16
5.25
5.20
6.29
6.09
6.11
6.07
6.05
4.38
4.29
4.27
4.16
4.12
03
03
03
03
03
03
03
1.24
1.26
1.25
1.26
1.26
1.22
1.01
1.17
1.20
1.18
1.16
1.08
0.98
0.89
1.19
1.19
1.15
1.15
1.09
0.94
0.92
1.22
1.20
1.16
1.17
1.10
0.94
0.97
1.29
1.27
1.23
1.24
1.22
1.04
1.05
1.25
1.24
1.21
1.22
1.21
1.06
1.01
1.76
1.64
1.59
1.65
1.41
1.23
1.50
3.07
2.92
2.81
2.94
2.53
2.27
2.84
4.30
4.14
4.04
4.16
3.74
3.51
4.14
5.14
5.01
4.98
5.07
4.70
4.56
5.06
1.68
1.28
1.13
1.39
1.19
0.95
1.33
2.32
2.03
1.99
2.21
1.94
1.75
2.12
7.35
7.06
6.95
6.85
6.38
6.19
6.62
5.19
5.15
5.12
5.17
4.92
4.87
5.14
5.92
5.84
5.75
5.81
5.48
5.23
5.63
3.99
3.86
3.76
3.80
3.66
3.52
3.57
Jan
Feb
Mar
Apr
May
Jun
Jul
Weekly
Jun
Jun
Jun
Jun
Jul
Jul
Jul
Jul
Aug
Aug
Daily
Jul
Jul
Jul
Jul
Jul
Jul
Jul
Jul
Aug
Aug
Aug
Aug
Aug
6
13
20
27
4
11
18
25
1
8
03
03
03
03
03
03
03
03
03
03
1.25
1.24
1.25
1.17
1.09
0.97
1.03
1.02
1.03
--
1.15
1.06
0.88
0.84
0.86
0.90
0.85
0.89
0.94
0.92
1.07
0.94
0.86
0.88
0.89
0.90
0.91
0.93
0.97
0.96
1.05
0.93
0.87
0.91
0.96
0.96
0.96
0.98
1.02
1.05
1.18
1.05
0.96
0.98
1.05
1.04
1.05
1.05
1.07
1.08
1.21
1.10
0.99
0.97
1.01
1.01
1.01
1.02
1.02
1.03
1.26
1.14
1.22
1.28
1.33
1.38
1.49
1.58
1.75
1.81
2.28
2.13
2.27
2.36
2.48
2.59
2.80
3.03
3.27
3.26
3.53
3.37
3.49
3.59
3.74
3.88
4.08
4.32
4.59
4.57
4.57
4.45
4.53
4.64
4.77
4.86
5.02
5.19
5.42
5.43
1.03
0.84
0.94
0.96
1.09
1.20
1.27
1.44
1.61
1.64
1.79
1.63
1.75
1.81
1.96
2.03
2.04
2.18
2.36
2.37
6.22
6.08
6.17
6.26
6.36
6.42
6.57
6.75
6.97
--
4.83
4.78
4.89
4.97
4.99
5.00
5.10
5.20
5.42
--
5.26
5.21
5.21
5.24
5.40
5.52
5.67
5.94
6.14
6.34
3.59
3.54
3.51
3.45
3.49
3.55
3.58
3.67
3.68
3.80
22
23
24
25
28
29
30
31
1
4
5
6
7
03
03
03
03
03
03
03
03
03
03
03
03
03
1.00
1.05
1.04
1.03
1.05
1.04
1.03
1.04
1.00
1.00
0.86
0.88
--
0.89
0.90
0.91
0.92
0.97
0.99
0.94
0.91
0.91
0.91
0.93
0.92
0.91
0.93
0.93
0.93
0.93
0.97
0.99
0.98
0.96
0.95
0.97
0.96
0.95
0.95
0.97
0.97
0.98
0.98
1.01
1.01
1.01
1.02
1.04
1.05
1.05
1.04
1.04
1.05
1.05
1.05
1.05
1.05
1.06
1.07
1.07
1.10
1.08
1.08
1.08
1.08
1.00
1.01
1.02
1.05
1.02
1.01
1.02
1.01
1.03
1.05
1.03
1.02
--
1.60
1.56
1.58
1.58
1.65
1.72
1.67
1.82
1.87
1.75
1.91
1.80
1.77
3.05
3.00
3.04
3.07
3.17
3.28
3.23
3.33
3.36
3.23
3.37
3.24
3.19
4.33
4.28
4.36
4.39
4.48
4.59
4.54
4.68
4.68
4.59
4.70
4.53
4.47
5.18
5.16
5.22
5.26
5.34
5.42
5.38
5.49
5.47
5.43
5.53
5.39
5.38
1.48
1.39
1.43
1.39
1.51
1.63
1.56
1.68
1.68
1.56
1.70
1.58
1.49
2.20
2.13
2.18
2.16
2.28
2.40
2.30
2.42
2.41
2.32
2.44
2.35
2.29
6.73
6.71
6.75
6.79
6.89
6.97
6.89
7.07
7.01
6.97
7.09
6.96
--
--------------
--------------
--------------
NOTE: Weekly data for columns 1 through 13 are week-ending averages. Columns 2 through 4 are on a coupon equivalent basis. Data in column 6 are interpolated from data on certain commercial paper trades settled by the
Depository Trust Company. Column 14 is the Bond Buyer revenue index, which is a 1-day quote for Thursday. Column 15 is the average contract rate on new commitments for fixed-rate mortgages (FRMs) with 80 percent
loan-to-value ratios at major institutional lenders. Column 16 is the average initial contract rate on new commitments for 1-year, adjustable-rate mortgages (ARMs) at major institutional lenders offering both FRMs and
ARMs with the same number of discount points.
MFMA
Strictly Confidential (FR)Class II FOMC
Money Aggregates
Seasonally adjusted
nontransactions components
Period
M3
In M2
In M3 only
2
3
4
5
-1.7
6.8
3.2
6.1
10.2
6.8
8.5
11.2
7.7
17.3
18.5
5.4
9.2
12.7
6.3
3.0
4.9
7.5
9.2
8.8
7.0
6.5
8.5
10.4
7.6
6.3
8.3
3.4
9.2
3.6
0.8
7.1
7.7
5.6
6.1
7.0
-11.3
6.9
11.5
-0.4
8.1
10.3
8.1
5.4
8.0
8.3
3.2
11.2
13.3
5.1
7.1
10.7
1.8
-1.0
13.0
6.9
-12.4
38.0
17.6
6.7
9.6
5.9
1.5
17.6
7.8
2.6
20.3
3.4
0.4
20.3
13.3
-1.0
6.1
11.3
2.9
4.7
17.6
9.3
9.2
7.1
9.0
2.8
5.9
16.9
8.2
11.9
-13.1
-3.2
6.0
-3.6
0.8
7.4
48.1*
0.0
6.7
3.9
2.1
12.3
8.7
21.2*
1233.5
1237.0
1237.4
1258.3
1272.2
5875.9
5890.1
5913.4
6000.1
6046.4
4642.4
4653.1
4675.9
4741.7
4774.2
2690.2
2703.6
2695.5
2697.3
2713.9
8566.1
8593.7
8608.9
8697.4
8760.3
2
9
16
23
30
1261.4
1260.9
1277.0
1272.6
1283.9
6021.3
6023.4
6047.5
6052.7
6074.2
4760.0
4762.4
4770.5
4780.1
4790.4
2695.3
2692.4
2693.8
2715.1
2760.7
8716.6
8715.7
8741.3
8767.7
8834.9
7
14
21p
28p
1266.8
1266.1
1275.9
1279.0
6092.3
6084.5
6080.8
6088.5
4825.4
4818.4
4804.9
4809.4
2828.8†
2833.6†
2809.0†
2823.0†
8921.0†
8918.1†
8889.8†
8911.5†
Quarterly(average)
2002-Q3
Q4
2003-Q1
Q2
Monthly
2002-July
Aug.
Sep.
Oct.
Nov.
Dec.
2003-Jan.
Feb.
Mar.
Apr.
May
June
July e
Levels ($billions):
Monthly
2003-Feb.
Mar.
Apr.
May
June
July
M2
1
Annual growth rates(%):
Annually (Q4 to Q4)
2000
2001
2002
Weekly
2003-June
M1
p
e
preliminary
estimated
*
†
FIN 46-adjusted growth rates for non-M2 M3 and M3 are 14.5 percent and 10.8 percent, respectively. FIN 46 has had no material impact on M2 as yet.
Beginning July 7, includes $76 billion due to FIN 46 effects.
1,032
808
348
692
115
539
207
326
79
366
104
245
142
34
166
---
Jun
Jul
2003 May 14
May 21
May 28
Jun 4
Jun 11
Jun 18
Jun 25
Jul 2
Jul 9
Jul 16
Jul 23
Jul 30
Aug 6
2003 Aug 7
Jun 25-Aug 7
---
---
---
-----
-----
-----
-----
-----
-----
-----
-----
-----
---
---
-----
-----
---
---
Net
239.9
1,061
---
166
142
34
104
245
79
366
207
326
115
539
348
692
1,032
808
3,543
1,684
4,161
1,863
---
---
6,024
6,259
6,117
250
8,227
21,421
-15,846
5,408
Change
110.7
---
---
---
-----
-----
-----
-----
-----
--786
-----
1,422
786
478
1,318
---
---
1,796
2,209
2,835
---
5,535
12,720
8,809
15,663
<1
177.7
---
---
---
-----
-----
-----
-----
-----
--1,057
-----
733
1,057
2,127
710
---
339
2,837
1,790
3,676
339
2,580
12,748
14,482
22,814
1-5
44.8
---
---
---
-----
-----
-----
-----
-----
--234
-----
--234
769
522
---
314
1,291
234
1,318
314
2,471
5,074
5,871
6,003
5-10
Net Purchases 3
4.
5.
6.
7.
---
---
---
-----
-----
-----
-----
-----
-----
-----
-----
-----
---
---
-----
-----
---
---
3,779
16,802
Redemptions
(-)
413.2
---
---
---
-----
-----
-----
-----
-----
--2,077
-----
2,155
2,077
3,374
2,600
---
653
5,974
4,232
7,972
653
10,796
32,822
31,215
36,208
Net
Change
0.0
---
---
---
-----
-----
-----
-----
-----
-----
-----
-----
-----
---
---
-----
-----
---
---
51
120
653.1
1,061
---
166
142
34
104
245
79
366
207
326
115
539
348
2,768
1,032
808
5,699
3,761
7,534
4,463
---
653
11,998
10,491
14,089
903
19,023
54,242
15,318
41,496
outright
holdings 4
total
Agency
Redemptions
(-)
Net change
Federal
Includes redemptions (-) of Treasury and agency securities.
RPs outstanding less reverse RPs.
Original maturity of 15 days or less.
Original maturity of 16 to 90 days.
80.0
---
---
---
-----
-----
-----
-----
-----
-----
-----
-----
--50
---
---
50
---
143
---
210
2,280
5,833
8,531
Over 10
Treasury Coupons
-12.9
-5,280
864
4,612
1,747
-632
-430
-1,330
1,892
1,979
-3,357
-754
7,067
-5,433
4,791
-2,810
-3,302
2,486
-265
-515
1,736
-2,254
1,342
-1,097
1,957
-2,578
-3,067
4,892
-2,644
-5,366
-2,163
3,492
ShortTerm 6
13.0
-6,000
---
-2,000
---3,000
---1,000
-----
-----
-1,001
1,000
1,000
2,000
1,354
-1,548
816
346
-2,262
520
-3,581
10,706
3,770
1,056
-5,225
-304
-4,563
517
7,133
636
LongTerm 7
Net RPs 5
MRA:HRM
0.1
-11,280
864
2,612
1,747
-3,632
-430
-2,330
1,892
1,979
-3,357
-754
6,066
-4,433
5,791
-810
-1,948
938
551
-170
-526
-1,734
-2,239
9,610
5,727
-1,522
-8,291
4,588
-7,207
-4,850
4,970
4,128
Net
Change
Class II FOMC
(Millions of dollars, not seasonally adjusted)
1. Change from end-of-period to end-of-period. Excludes changes in compensation for the effects of
inflation on the principal of inflation-indexed securities.
2. Outright purchases less outright sales (in market and with foreign accounts).
3. Outright purchases less outright sales (in market and with foreign accounts). Includes short-term notes
acquired in exchange for maturing bills. Excludes maturity shifts and rollovers of maturing issues,
except the rollover of inflation compensation.
Memo: LEVEL (bil. $)
Aug 7
1,061
3,543
1,684
Apr
May
Intermeeting Period
---
---
2002 Dec
4,161
1,863
6,024
6,259
2003 QI
QII
Feb
Mar
6,117
250
QIII
QIV
2003 Jan
8,227
2002 QII
21,421
2002
24,522
10,095
(-)
8,676
15,503
Redemptions
Net
Treasury Bills
Purchases 2
2000
2001
August 7, 2003
Strictly Confidential
Changes in System Holdings of Securities 1
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
DIVISION OF MONETARY AFFAIRS
Date:
August 8, 2003
To:
Bluebook Recipients
From:
Brian Sack
Subject:
Corrected Chart 1 from Bluebook
Attached please find a corrected version of Chart 1 from the Bluebook. The
updated chart corrects the five-year inflation compensation measure shown in the middleright panel.
Chart 1
Interest Rate Developments
Treasury Yield Curve*
--
.....-
I
I
1
8
I
7
5
I
10
I
20
I
30
Maturity in Years
*Smoothed yield curve estimated from off-the-run Treasury
coupon securities.
Percent
-
Daily
-
8/7/2003
Day before FOMC meeting 6/24/2003
I
3
Treasury Yields*
Percent
I
Two-Year Treasury
Ten-Year Treasury
I
Jan.
I
I
Feb.
i-I
I
I
I
I
Mar.
Apr.
May
June
2003
*Par yields from the off-the-run Treasury yield curve.
July
Inflation Compensation*
Change in Treasury Yields*
Basis points
Daily
--------
Jan.
1
2
3
5
7
10
Maturity in Years
*Change since day before June FOMC meeting.
20
Expected Federal Funds Rates*
Percent
Over Next Five Years
From Five to Ten Years Ahead
Feb.
Mar.
Apr.
May
June
July
2003
*Based on a comparison of an estimated TIIS yield curve to the nominal
off-the-run Treasury yield curve.
30
Percent
Implied Distribution of Federal Funds Rate
Five Months Ahead*
Percent
June 24, 2003
I
August 7, 2003
August 7, 2003
.....-S111111111111111111
17-
June 24, 2003
11 111
11 1 1
I
Dec.
Dec.
Apr.
Aug.
Dec.
Apr.
Aug.
Aug.
2003
2004
2005
2006
*Estimates from federal funds and eurodollar futures, with an allowance
for term premia and other adjustments.
Note: Vertical lines indicate June 24, 2003.
0.25
0.50
0.75
1.00
1.25
1.50
1.75 2.00
2.25
*Estimates from options on eurodollar utures contracts, adjusted
to estimate expectations for the federal funds rate.
Cite this document
APA
Federal Reserve (2003, August 11). Bluebook. Bluebooks, Federal Reserve. https://whenthefedspeaks.com/doc/bluebook_20030812
BibTeX
@misc{wtfs_bluebook_20030812,
author = {Federal Reserve},
title = {Bluebook},
year = {2003},
month = {Aug},
howpublished = {Bluebooks, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/bluebook_20030812},
note = {Retrieved via When the Fed Speaks corpus}
}