Economic Outlook - CFA Institute Event Presentations... · Economic Outlook C.F.A. West Michigan...

Paul Traub

Economic Outlook C.F.A. West Michigan Society Luncheon

Federal Reserve Bank of Chicago

Detroit Branch May 22, 2012

Overview

May 22, 2012 1 Federal Reserve Bank of Chicago

• Economy - GDP

• The U.S. Consumer

• Home Prices

• Inflation

• Employment

• U.S. Automotive Industry

• The F.O.M.C.


Source: IMF World Economic Outlook – April, 2012

Global Economic Data Real GDP – Annual Percent Change

2010 2011 2012 2013 2012 2013

World Output 5.3 3.9 3.5 4.1 -1.0 -0.5

Advanced Economies 3.2 1.6 1.4 2.0 -1.2 -0.5

U.S. 3.0 1.7 2.1 2.4 -0.8 -0.4

European Union 1.9 1.4 0.0 1.3 -2.0 -0.9

Japan 4.4 -0.7 2.0 1.7 0.0 0.0

United Kingdom 2.1 0.7 0.8 2.0 -1.5 -0.5

Canada 3.2 2.5 2.1 2.2 -0.6 -0.3

Emerging Economies 7.5 6.2 5.7 6.0 -0.8 -0.5

Russia 4.3 4.3 4.0 3.9 -0.5 -0.4

China 10.4 9.2 8.2 8.8 -1.3 -0.7

India 10.6 7.2 6.9 7.3 -1.0 -0.9

Brazil 7.5 2.7 3.0 4.2 -1.1 0.0

Mexico 5.5 4.0 3.6 3.7 -0.4 0.3

Year over Year Difference from April '11

April '12 Projections WEO Projections

Billions Chained $2005, % Change Q/Q at SAAR

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

11,000

11,500

12,000

12,500

13,000

13,500

14,000

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

$ Billions

Q4 ‘07 $13,326

Q1 ‘12 $13,502

Q2 ‘09 $12,663

Declined $685B (Peak to Trough, -5.1%)


Q1 ‘12 2.2%

U.S. Real GDP

Q4 ‘08 -8.9%

Percent


U.S. Real GDP Contribution to Percent Change – Q1 ‘12

0.6

2.2 2.0

0.2

0.0

(0.6)

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

GDP Consumption Investment Net Exports Government

0.8

Change in

Inventories

Other

-6.0

-3.0

0.0

3.0

6.0

9.0

12.0

7,000

7,500

8,000

8,500

9,000

9,500

10,000

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

$ Billions


Personal Consumption Private Domestic Investment

-8.0

-4.0

0.0

4.0

8.0

12.0

16.0

2,000

2,100

2,200

2,300

2,400

2,500

2,600

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

$ Billions Government Consumption

Q1 ‘12 9,550

Q1 ‘12 2,462

U.S. Real GDP by Sector

2.9%

800

1,100

1,400

1,700

2,000

2,300

2,600

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

$ Billions Imports and Exports

Q1 ‘12 2,231

Q1 ‘12 1,821

Imports

Exports

-3.0%

Percent

-60.0

-40.0

-20.0

0.0

20.0

40.0

60.0

1,200

1,400

1,600

1,800

2,000

2,200

2,400

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

$ Billions

Q1 ‘12 1,903

6.0%

Percent Q1 ‘06 2,266

Percent


Declined $ 869 Billion Declined $ 314 Billion


-60.0

-40.0

-20.0

0.0

20.0

40.0

60.0

80.0

200

300

400

500

600

700

800

900

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

$ Billions

Q3 ‘05 $783.3

Q1 ‘12 $349.4

Percent Change (Peak to Trough) -59.0%


Q1 ‘12 19.1%

U.S. Gross Private Domestic Investment - Residential

Q1 ‘09 -35.4%

Percent


Category 2007 2008 2009 2010 2011

Petroleum / Energy Related 100.0 162.0 127.4 170.3 248.3

Agriculture - Nonfood Stuff 100.0 108.5 95.6 125.5 143.2

Metal Related Materials an Products 100.0 116.5 88.2 111.5 135.9

Agriculture - Food Stuff 100.0 122.4 113.9 124.4 135.8

Jewerly, Art and Gems 100.0 109.7 92.4 107.3 122.8

Chemicals 100.0 110.2 91.4 112.1 120.6

Machinery and Equipment 100.0 104.3 89.8 103.4 109.4

Houshold Goods and Electrical 100.0 103.6 107.2 110.7 105.7

Lumber and Wood Supplies 100.0 92.2 77.1 99.1 105.1

Textiles 100.0 95.8 81.5 95.7 102.7

Transportatin Equipment and Parts 100.0 96.0 82.5 92.2 99.4

Glass-plate 100.0 105.1 93.1 101.2 98.8

Computers and Electrical Equipment and Parts 100.0 98.5 89.7 99.6 97.3

Military 100.0 93.5 89.5 88.3 79.1

U.S. Exports by Category Real $2005 - Index, 2007 = 100

Note: Categories deflated using GDP price deflator for export goods.


1.0

1.5

2.0

2.5

3.0

3.5

Mar '11

Apr May Jun Jul Aug Sep Oct Nov Dec Jan '12 Feb Mar Apr May

2012 2013

Percent Change Yr / Yr

Consensus of the Blue Chip by Month

U.S. Real GDP

2.5

2.3

2.0

3.3


Actual / Forecast GDP and Potential GDP

Closing the Output Gap

10,500

11,500

12,500

13,500

14,500

15,500

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

Potential Actual 2% Growth

3% Growth 4% Growth 5% Growth

$ Billions

Q1 ‘15

Q1 ‘14

Q1 ‘20

The U.S. Consumer

May 22, 2012 Federal Reserve Bank of Chicago 10

Income and Savings Rate

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

Mar ‘12 0.6%

11 Federal Reserve Bank of Chicago

Percent

Percent Change Yr/Yr, Percent of DPI

May 22, 2012

Mar ‘12 3.8%

12.0

14.0

16.0

18.0

20.0

22.0

24.0

26.0

'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12

Consumer Credit


Apr ‘12 21.5

Percent

Mar ‘03 24.1

May 22, 2012

Percent of Disposable Personal Income

Note: Includes Revolving and Nonrevolving Credit.

Stock Market Value

13 Federal Reserve Bank of Chicago May 22, 2012

600

800

1,000

1,200

1,400

1,600

1,800

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

Index

S & P 500 Index – Monthly Average

Apr ‘12 1,386

Home Prices


Case-Shiller 20 City Home Price Index, 2000 = 100

Index

75.0

100.0

125.0

150.0

175.0

200.0

225.0

'00 '02 '04 '06 '08 '10 '12

Feb ‘12 136.7

Apr ’06 206.7


Household Net Worth

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10

Home Equity Financial and Other

-$8.4

Trillion

Billions of Dollars, Q1 ‘80 to Q4 ‘11

Total Decline

Q4 ‘07 – Q1 ‘09 -$16.4 Trillion

Consumer Sentiment


University of Michigan

Index

20

40

60

80

100

120

140

'82 '86 '90 '94 '98 '02 '06 '10

Apr ‘12 76.4

January ‘00 112.0

Home Prices


Home Prices


Home Price Index - Q1, 2000 = 100

Index

75.0

100.0

125.0

150.0

175.0

200.0

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

U.S. Case-Shiller MI FHFA U.S. FHFA

Q4 ‘11 140.1

Q1 ’06 190.9

Q1 ’07 165.7

Q3 ’05 126.7 125.7

96.3

Source: S&P Case-Shiller U.S. National Index, FHFA All Transactions Price Index U.S. & Michigan

Total Homeowner Real Estate Equity

Homeowner Equity

$Trillions

0.0

2.5

5.0

7.5

10.0

12.5

15.0

'52 '55 '58 '61 '64 '67 '70 '73 '76 '79 '82 '85 '88 '91 '94 '97 '00 '03 '06 '09

May 22, 2012 19 Federal Reserve Bank of

Chicago

Q1 ‘06 $13.5

Q4 ‘11 $6.1

Total Mortgage Liability

Household and Nonprofit Mortgage Liability

$Trillions

0.0

2.0

4.0

6.0

8.0

10.0

12.0

'52 '55 '58 '61 '64 '67 '70 '73 '76 '79 '82 '85 '88 '91 '94 '97 '00 '03 '06 '09


Chicago

Q1 ‘08 $10.6

Q4 ‘11 $9.8

Total Homeowner Real Estate Value

Homeowner Equity + Home Mortgages

$Trillions

0.0

5.0

10.0

15.0

20.0

25.0

'52 '55 '58 '61 '64 '67 '70 '73 '76 '79 '82 '85 '88 '91 '94 '97 '00 '03 '06 '09


Chicago

Q4 ‘06 $22.7

Q4 ‘11 $15.9

Value of Structures


Household structures replacement cost at current cost basis

$Trillions

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

'52 '55 '58 '61 '64 '67 '70 '73 '76 '79 '82 '85 '88 '91 '94 '97 '00 '03 '06 '09

Q4 ‘11 $14.1

Q4 ‘07 $14.5

Home Ownership Premium

Total Homeowner Value – Value of Structures

$Trillions

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

'52 '55 '58 '61 '64 '67 '70 '73 '76 '79 '82 '85 '88 '91 '94 '97 '00 '03 '06 '09


Chicago

Q4 ‘11 $1.8

Q1 ‘06 $9.1

Home Ownership Premium Ratio

Home Ownership Premium / Total Real Estate Value

Percent

0.0

10.0

20.0

30.0

40.0

50.0

'52 '55 '58 '61 '64 '67 '70 '73 '76 '79 '82 '85 '88 '91 '94 '97 '00 '03 '06 '09


Chicago

Q4 ‘11 11.5

Q1 ‘06 40.0

Residential Construction

New Privately Owned Housing Units Under Construction

Thousands

0

200

400

600

800

1,000

1,200

1,400

1,600

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12


Chicago

Apr ‘12 457

Jan ‘06 1424

Inflation


Inflation – Price Indexes for PCE


-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

'80 '85 '90 '95 '00 '05 '10


PCE - All Items Mar ‘12

2.3%

PCE – Core Mar ’12

2.0%

Percent


Inflation Expectation & CPI

Source: U of M , Expected Change in Prices During Next 12 Months and BLS

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Jan '10 Jan '11 Jan '12

U of M Survey CPI - All Items

Percent Change Yr/Yr

U of M Survey Data

Current Expectation versus Actual

Percent

'During the next 12 months, do you think that prices in general will go up, or go down, or

stay where they are now?' and 'By what percent do you expect prices to go up, on the

average, during the next 12 months?'

Apr ‘12

3.8

Apr ‘12

2.3

Producer Price Index – Crude Materials


-50.0

-40.0

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

50.0

'80 '85 '90 '95 '00 '05 '10


Apr ‘12 -7.8%

Percent

Producer Price Index – Intermediate Goods


-18.0

-14.0

-10.0

-6.0

-2.0

2.0

6.0

10.0

14.0

18.0

'80 '85 '90 '95 '00 '05 '10


Apr ‘12 1.1%

Percent

Producer Price Index – Finished Goods


-7.0

-5.0

-3.0

-1.0

1.0

3.0

5.0

7.0

9.0

11.0

13.0

15.0

'80 '85 '90 '95 '00 '05 '10


PPI – Finished Goods Apr ‘12

1.9%

PPI – Finished Goods - Less

Food & Energy Apr ’12

2.8%

Percent

Productivity & Utilization


Total Industrial Utilization and Output Per Person – Mfg.

-10.0

-5.0

0.0

5.0

10.0

15.0

60

65

70

75

80

85

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

Productivity Capacity Utilization

Percent Percent Chg. Y/Y


0.0

25.0

50.0

75.0

100.0

125.0

150.0

175.0

200.0

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

Index

Monthly Average – Index, 2007 = 100

Apr ’12 142.9

May 22, 2012

Crude Oil and Natural Gas

27.9

Natural Gas Price: Henry Hub, LA

Crude Oil - WTI

PCE on Energy Goods


Percent of Total PCE, Q1 ‘60 to Q1 ‘12

Percent

1.0

2.0

3.0

4.0

5.0

6.0

7.0

'60 '63 '66 '69 '72 '75 '78 '81 '84 '87 '90 '93 '96 '99 '02 '05 '08 '11

Note: Consists of gasoline and other energy goods and of electricity and gas.

1960’s 1970’s 1980’s

1990’s

2000’s 2010’s

Inflation – Consumer Price Index


-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12


CPI - All Items Apr ‘12

2.3%

CPI – Core Apr ’12

2.3%

Percent

Employment



Employment Gains / Losses Nonfarm Payroll – In Thousands

(1,000.0)

(800.0)

(600.0)

(400.0)

(200.0)

0.0

200.0

400.0

600.0

'07 '08 '09 '10 '11 '12

Apr ‘12 115

Jan ‘09 818

-8,879

Thousands

+ 3,745 = -5,034


0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

'82 '86 '90 '94 '98 '02 '06 '10

Apr ‘12 384

Mar ‘09 643

Weekly Initial Unemployment Claims

Monthly Average – In Thousands

Thousands

Note: Week ending April 21 claims were 338,000 and the 4 week moving average was 381,750.

May 22, 2012 40

Federal Reserve Bank of Chicago

Initial Unemployment Claims and Job Creation

Monthly Average – Initial Unemployment Claims and Change in

Employment 1967 to Present - In Thousands

-268

19

87

159 185 191 180

-400.0

-300.0

-200.0

-100.0

0.0

100.0

200.0

300.0

> 500 500 - 450 450 - 400 400 - 350 350 - 300 300 - 250 < 250

Average Jobs Created


62.0

63.0

64.0

65.0

66.0

67.0

68.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12

U.S. Participation Rate

Percent

Apr ‘12

8.1%

May 22, 2012

Unemployment & Participation Rates

Apr ‘12

63.6

United States - SA


Participation Rate by Age Bracket

80.0

85.0

90.0

95.0

100.0

105.0

110.0

'07 '08 '09 '10 '11 '12

Total 16-24 yrs. 25-34 yrs. 35-44 yrs. 45-54 yrs. 55+ yrs.

Total

16 - 24 yrs.

55+ yrs.

Percent

Index, January 2007 = 100


Expected Age at Retirement

Percent Age 66 or Older + Never Retire

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

'96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11

Age 66 or Older Never Retire

19%

4%

36%

8%

Source: Employment Benefit Research Institute, The 2011 Retirement Confidence Survey

Percent

45%

13%

Job Creation and the Unemployment Rate


135.0

140.0

145.0

150.0

155.0

160.0

'00 '02 '04 '06 '08 '10 '12 '14 '16 '18

5.5%

6.5%

7.5%

8.5% 9.5%

10.5%

Unem

plo

ym

ent R

ate

Millions

400K / Mo. 300K / Mo. 200K / Mo.

Total Household Employment

Sep ‘13

Sep ‘14

Nov ‘20

2012 2013 2014 2015 2016 2017 2018

200K Jobs Per Month 7.9 7.5 7.2 6.9 6.6 6.3 6.1

300K Jobs Per Month 7.4 6.3 5.5 5.5 5.5 5.5 5.5

400K Jobs Per Month 6.9 5.5 5.5 5.5 5.5 5.5 5.5

Year End Unemployment Rate at Different Levels of Job Growth

Automotive



8.0

10.0

12.0

14.0

16.0

18.0

1995 1997 1999 2001 2003 2005 2007 2009 2011

17.3

10.4

Source: Ward’s Automotive

12.7

U.S. Light Vehicle Sales

16.1

Millions of Units


6.0

8.0

10.0

12.0

14.0

16.0

18.0

Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12

Aug ’09

14.2

Apr ‘12

14.4

Apr ’09

9.4

Seasonally Adjusted Annual Rate

Millions

U.S. Light Vehicle Sales

12 MMA

13.2

Cash for Clunkers


0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

$/Gallon

Monthly Average – All Grades, All Formulations

Apr ’12 $3.90

May 22, 2012

Retail Gasoline Price


Gasoline Price Volatility

Monthly Seasonal Factors

0.850

0.875

0.900

0.925

0.950

0.975

1.000

1.025

1.050

1.075

1.100

1.125

1.150

'78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10

Peak to Trough – 20% swing in gasoline price.


Average Fuel Efficiency

U.S. Light Vehicles – Sales Weighted MPG

20.0

22.5

25.0

27.5

30.0

32.5

35.0

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11

Car Light Truck Total

28.5

33.8

Improvement ‘00 to ’11 18.6% 15.0% 16.1%

21.3

24.5

24.9

28.9


12.5

13.0

13.5

14.0

14.5

15.0

15.5

Jun '11 Jul Aug Sep Oct Nov Dec Jan '12 Feb Mar Apr May

2012 Forecast 2013 Forecast

U.S. Light Vehicle Sales Annual Sales

Consensus of the Blue Chip by Month

13.3

14.1

14.5

14.9


Auto Recession Cycles

80

100

120

140

160

180

T-4 T-2 T-0 T-2 T-4 T-6 T-8 T-10 T-12

Quarters, T-0 = Trough

Q1 '09 Trough '09 Trend 70 - '91 Average Average Trend

Quarterly Cycle Index, Trough = 100

Japan Earth Quake

Cash for Clunkers

Index


Three Determinants of a stock adjustment model

1. Replacement of scrapped vehicles

• Scrap Rates

2. Change in population

• Employment

3. Change in demand • Vehicles per Person

• Trade-in Cycles

• Miles Driven

Determinates of Trend Vehicle Demand

4.0

4.5

5.0

5.5

6.0

6.5

7.0

'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11


U.S. Light Vehicles

Vehicle Scrap Rate

Percent

6.75

5.85

4.91 4.62

5.26

4.46


1997 to 2011 – as of July 1

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

180.0

188.0

196.0

204.0

212.0

220.0

228.0

236.0

244.0

252.0

'97 '99 '01 '03 '05 '07 '09 '11

Vehicle in Operation

Change in VIO

Millions Millions

7.0

-1.5

242.1 240.1


Average Vehicle Age From July 1 Each Year

Source: R. L. Polk

Total

Passenger Light Light

Year Cars Trucks Vehicle

2000 9.1 8.4 8.9

2001 9.3 8.4 8.9

2002 9.4 8.4 9.0

2003 9.6 8.5 9.1

2004 9.8 8.6 9.4

2005 10.1 8.7 9.5

2006 10.3 8.9 9.7

2007 10.4 9.0 9.8

2008 10.6 9.3 10.0

2009 10.8 9.8 10.3

2010 11.0 10.1 10.6

2011 11.1 10.4 10.8

10.0

10.5

11.0

11.5

12.0

12.5

13.0

13.5

'70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10


Total Miles Traveled / Vehicles in Operation, Annual Average

Miles Per Vehicle

Thousands

‘72 11.9

‘02 12.9

‘11 11.9

‘08 11.7

Source: R.L. Polk and Federal Highway Administration

‘80 10.9


U.S. L. V. Sales Per Nonfarm Employee

0.06

0.08

0.10

0.12

0.14

0.16

0.18

0.20

'68 '72 '76 '80 '84 '88 '92 '96 '00 '04 '08 '12

Seasonally Adjusted Annual Rate – 12 MMA

Light Vehicle Sales would be 15.9 Million at Current

Employment and Trend Nonfarm VPE

Trend


New and Used Vehicles Prices Percent Change Since January 2007

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

'07 '08 '09 '10 '11 '12

New Used

Mar ‘12 10.2%

5.3%

Percent

Source: Bureau of Labor Statistics, CPI New Vehicles and Used Cars and Trucks


Comerica Auto Affordability Index Weeks of Median Family Income Needed to Buy a New Car

20.0

22.5

25.0

27.5

30.0

32.5

'79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11

Q1 ‘12 23.2

Weeks

Source: Comerica Bank


U.S. Light Vehicle Industry

Millions of Units

8,000

10,000

12,000

14,000

16,000

18,000

20,000

1980 1985 1990 1995 2000 2005 2010 2015 2020

17.3

10.4

16.0

12.3

2020 16.5 2012

16.0

Blue Chip

Consensus

2012 – 14.5

12.7

Trend 2013 – 14.9


Factors Supporting Light Vehicle Sales

1. Since 2007 light vehicle sales have been well below trend helping to

create a large amount of pent-up demand.

2. The vehicle fleet is older than it has been since WW II.

3. Employment levels are slowly returning.

4. CPI for new vehicles is growing more slowly than for used vehicles.

5. Higher used vehicle prices means that buyers actually have quite a bit

of equity in their used vehicle that they can use as a down payment.

6. Between 2007 and 2010 vehicles in operation (VIO) actually fell by 1.5

million units while the driving age population grew by 5.1 million people.

7. Higher fuel prices are being offset by more fuel efficient product

offerings.


Economic Projections of FOMC April 2012


April 25, 2012 F.O.M.C Meeting

1. Information received since the F.O.M.C. met in March suggests that the

economy has been expanding moderately.

2. Labor market conditions have improved in recent months; the

unemployment rate has declined in recent months but remains elevated.

3. Household spending and business fixed investment have continued to

advance but the housing sector remains depressed.

4. Inflation has picked up somewhat, mainly reflecting higher prices of

crude oil and gasoline. However, long-term inflation expectations have

remained stable.

5. The committee expects to maintain a highly accommodative stance for

monetary policy warranting exceptionally low federal funds rate at least

through late 2014.

6. The Committee decided to keep the target range for the federal funds

rate at 0.0 to 0.025 percent.


-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

Real GDP Percent Change

FOMC Members – April 2012 Forecast

Percent

High Forecast

Low Forecast

Change in Real GDP 2012 2013 2014 L.R. 2012 2013 2014 L.R.

High 2.9 3.1 3.6 2.6 3.0 3.8 4.3 3.0

Low 2.4 2.7 3.1 2.3 2.1 2.4 2.9 2.2

Centeral Tendency Range


0.0

2.0

4.0

6.0

8.0

10.0

12.0

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

Percent

Unemployment Rate

High Forecast

Low Forecast


Unemployment Rate 2012 2013 2014 L.R. 2012 2013 2014 L.R.

High 8.0 7.7 7.4 6.0 8.2 8.1 7.7 6.0

Low 7.8 7.3 6.7 5.2 7.8 7.0 6.3 4.9



0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

Percent

PCE Inflation

High Forecast

Low Forecast


PCE Inflation 2012 2013 2014 L.R. 2012 2013 2014 L.R.

High 2.0 2.0 2.0 2.3 2.1 2.2

Low 1.9 1.6 1.7 1.8 1.5 1.52.0 2.0



0.0

0.5

1.0

1.5

2.0

2.5

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

Percent

Core PCE Inflation

High Forecast

Low Forecast


Core PCE Inflation 2012 2013 2014 L.R. 2012 2013 2014 L.R.

High 2.0 2.0 2.0 2.0 2.1 2.2

Low 1.8 1.7 1.8 1.7 1.6 1.7


N/A N/A


Appropriate Timing of Policy Firming

3 3

7

4

0

1

2

3

4

5

6

7

8

2012 2013 2014 2015

Nu

mb

er

of P

art

icip

an

ts



Target Federal Funds Rate at Year-End

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2012 2013 2014 Longer

Run


Primary and Secondary Credit Rates

Discount Rates

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

'03 '04 '05 '06 '07 '08 '09 '10 '11 '12

Percent

Primary Credit Rate

Secondary Credit Rate


Chicago

Apr ’12 1.25

0.75

Effective and Expected Federal Funds Rate

Monetary Policy Expectations

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

'99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

Percent

Effective Federal Funds Rate

Expected Federal Funds Rate


Chicago

Thank You!

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