The views expressed are those of the presenter and do not necessarily reflect the positions of the Federal Reserve Bank of Kansas City or the Federal Reserve System.

U.S. & WyomingEconomic Update

Alison FelixEconomist & Branch Executive

Federal Reserve Bank of Kansas City Denver Branch

Overview of the Federal Reserve System

• Primary Functions– Monetary Policy: promote full employment and price stability

– Payments Services: bank for banks; bank for federal government

– Banking Supervision and Regulation: ensure safety and soundness of banks

• Structure– Board of Governors

• Consists of seven members who are appointed by the President and confirmed by the Senate to serve 14-year terms.

– Federal Reserve Banks• There are 12 Regional Reserve Banks, each serving a unique district. These are semi-

independent by design.

– Federal Open Market Committee (FOMC)• Comprised of the 7 members of the Board of Governors and the 12 Reserve Bank

Presidents (only 5 presidents are voting members on a rotating basis).

• Charged with conducting monetary policy to promote economic growth and price stability.

2

Regional Federal Reserve Banks and Branch Locations

3

The Denver Branch of the Federal Reserve Bank of Kansas City

• Functions

– Regional research and policy support covering the economies of Colorado, New Mexico

and Wyoming

– Economic, financial education, and community development outreach

– Examinations of Colorado, Wyoming and northern New Mexico financial institutions

– Cash processing and distribution

– Money Museum

– Around 165 employees

4

The U.S. economy expanded at a solid pace in the second half of 2014, and growth is expected to continue at a similar pace this year.

5Source: Bureau of Economic Analysis and Federal Open Market Committee (FOMC)/Haver Analytics

*Note: Projections as of March FOMC meeting

0.1%

2.7%

1.8%

4.5%

3.5%

-2.1%

4.6%5.0%

2.2%2.7% 2.7%

2.4%

2.3% 2.3% 2.0%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

'12Q4 '13Q1 '13Q2 '13Q3 '13Q4 '14Q1 '14Q2 '14Q3 '14Q4 2015 2016 2017

HighLow

FOMC Central Tendency

Projections*

REAL U.S. GROSS DOMESTIC PRODUCT

Percent Change from Previous Quarter at Seasonally Adjusted Annualized Rates

4.6%

9.6%

5.0% 4.9%

5.5%5.2% 5.1%

2.9%

6.5%

4.1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

2007 2008 2009 2010 2011 2012 2013 2014 Feb Mar 2015 2016

2015

Unemployment rates have declined in the U.S. and Wyoming, with Wyoming unemployment rates now below historical averages.

6Source: Bureau of Labor Statistics & Federal Reserve Board *March2015 Projections.

UNEMPLOYMENT RATES

Seasonally Adjusted

FOMC

Central Tendency Projections*

United States

Wyoming

-2%

0%

2%

4%

6%

Feb. '05 Feb. '07 Feb. '09 Feb. '11 Feb. '13 Feb. '15

PERSONAL CONSUMPTION EXPENDITURE PRICE INDEX (PCEPI)Percent Change Year-over-Year

Inflation remains below the FOMC’s two percent target, weighed down by declining energy prices.

7Source: Bureau of Economic Analytics

Headline Inflation

Core Inflation

FOMC’s Target

Inflation Rate

0%

1%

2%

3%

4%

5%

6%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

8Source: Federal Reserve Board

EFFECTIVE FEDERAL FUNDS RATE

“To support continued progress toward maximum employment and price stability, the

Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the

federal funds rate remains appropriate… Consistent with its previous statement, the

Committee judges that an increase in the target range for the federal funds rate remains unlikely

at the April FOMC meeting. The Committee anticipates that it will be appropriate to raise the

target range for the federal funds rate when it has seen further improvement in the labor

market and is reasonably confident that inflation will move back to its 2 percent objective over

the medium term.”

- March 2015 FOMC Statement

-$5

-$4

-$3

-$2

-$1

$0

$1

$2

$3

$4

$5

-$5

-$4

-$3

-$2

-$1

$0

$1

$2

$3

$4

$5

2009 2010 2011 2012 2013 2014 2015

FEDERAL RESERVE BALANCE SHEET

Trillions Trillions

9Source: Federal Reserve Board

Traditional Portfolio

Currency in Circulation

ReservesOther

Federal Agency & Mortgage-Backed

Securities

Foreign Currency Swaps

Short-Term Lending

Assets

Liabilities

“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. This policy, by keeping the Committee's holdings of

longer-term securities at sizable levels, should help maintain accommodative financial conditions.”

- March 2015 FOMC Statement

Most states have experienced positive job growth over the past year.

10Source: Bureau of Labor Statistics/Haver Analytics

PAYROLL EMPLOYMENT, MARCH 2015

Year-over-Year Percent Change, Seasonally Adjusted

Over 3%

2 to 3

1 to 2

0 to 1

-1 to 0

United States

2.3%

1.4%

95

100

105

110

115

120

Mar. '05 Mar. '07 Mar. '09 Mar. '11 Mar. '13 Mar. '15

Employment has been increasing in Wyoming for more than four years, but a weakening energy sector may weigh on the labor market this year.

11Source: Bureau of Labor Statistics

PAYROLL EMPLOYMENT GROWTH

Index 100 = March 2005, Seasonally Adjusted Percent Change Past 10Years

Past Year

Dec. ‘07 to

Current

U.S. 6.1% 2.3% 2.0%

WY 13.1% 1.4% 0.4%

United States

Wyoming

4.9%

4.9%

3.6%

3.5%

3.3%

3.2%

3.2%

2.7%

1.7%

1.0%

0.0%

-1.0%

-1.3%

-4.0%

-4.1%

-5.5%

Professional & Business Services

Leisure & Hospitality

Financial Activities

Construction

Health Care & Social Assistance

Wholesale Trade

Transportation & Utilities

Information

Retail Trade

Local Government

Private Educational Services

Manufacturing

State Government

Other Services

Federal Government

Natural Resources & Mining

Job gains have been broad-based across industries in the U.S. and Wyoming over the past year.

12Source: Bureau of Labor Statistics

CHANGE IN PAYROLL EMPLOYMENT, MARCH 2015Seasonally Adjusted

Percent Change Year-over-Year

United States

Wyoming

Top Performing Industries

Worst PerformingIndustries

0

20

40

60

80

100

120

140

160

180

200

Mar. '05 Mar. '07 Mar. '09 Mar. '11 Mar. '13 Mar. '15

Residential construction activity has picked up modestly over the last few years.

13Source: McGraw Hill/F.W. Dodge

VALUE OF RESIDENTIAL CONSTRUCTION

Index 100 = March 2005, Seasonally Adjusted Three-Month Moving Average

United States

Wyoming

Home prices are rising in most states.

14Source: Federal Housing Finance Agency

FHFA PURCHASE-ONLY HOME PRICE INDEX (2014Q4)

Percent Change Year-over-Year, Seasonally Adjusted

Over 10%

7.5 to 10

5 to 7.5

2.5 to 5

0 to 2.5

Below 0%

4.0%

United States

4.9%

Expanding

Contracting

Manufacturing activity has slowed in recent months.

15Source: Institute for Supply Management & Federal Reserve Bank of Kansas City

MANUFACTURING ACTIVITY

Diffusion Index, Seasonally Adjusted, Month-over-Month

U.S. 51.5March 2015

Kansas City 46.7

District April 2015

30

35

40

45

50

55

60

65

Apr. '05 Apr. '07 Apr. '09 Apr. '11 Apr. '13 Apr. '15

Tourism activity has been slightly above historical averages in Wyoming.

16Source: Rocky Mountain Lodging Report

HOTEL OCCUPANCY RATES

Wyoming

53.7%53.7%52.6%

30%

40%

50%

60%

70%

80%

90%

Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec

10-Year Range

2015

2014

10-Year Average

YTD

Averages

Drilling rigs have fallen sharply in recent months, and oil production is starting to edge down slightly.

17Source: Baker Hughes & Department of Energy, Energy Information Administration/Haver Analytics

OIL RIG COUNT

Number of Active Drilling Rigs

OIL PRODUCTION

Million Barrels per Month, SA

80

160

240

320

2

4

6

8

Jan. '05 Jan. '10 Jan. '15

Wyoming: Right Axis

United States: Left Axis

0

10

20

30

40

50

0

400

800

1,200

1,600

2,000

'08 '09 '10 '11 '12 '13 '14 '15

Wyoming:

Right Axis

United States:

Left Axis

As energy activity declines, layoff announcements are increasing, and employment has decreased in the energy sector.

18Source: Bureau of Labor Statistics

MINING EMPLOYMENT

Seasonally Adjusted, Index: 100 = March ‘05

100

110

120

130

140

150

160

Mar. '05 Mar. '07 Mar. '09 Mar. '11 Mar. '13 Mar. '15

Wyoming

United States

Energy firms expect additional declines in drilling, profits and employment over the next six months.

19Source: FRBKC Energy Survey

-100

-80

-60

-40

-20

0

20

40

60

Q12014

Q22014

Q32014

Q42014

Q12015

Q32015 (exp)

Drilling/BusinessActivityAccess to Credit

Profits-100

-80

-60

-40

-20

0

20

40

60

Q12014

Q22014

Q32014

Q42014

Q12015

Q32015(exp)

Employment

Employee Hours

Wages/Benefits

FRBKC ENERGY SURVEY

Quarterly Diffusion Indexes

Breakeven oil prices have fallen as productivity rises and costs decline.

20Source: Energy Information Administration, Reuters

REPORTED BREAKEVEN OIL PRICES AND WTI PRICE EXPECTATIONS

Diffusion Index, Seasonally Adjusted, Month-over-Month

$/Barrel

40

60

80

100

120

40

60

80

100

120

Jan. '14 May. '14 Sep. '14 Jan. '15 May. '15 Sep. '15 Jan. '16 May. '16 Sep. '16

April 3 WTI Futures

WTI

Energy Survey

avg. breakeven

in late Sept.

2014 - $79

Dec. 2014 exp.

year-end 2015

WTI price - $70

Late Mar. 2015

avg. breakeven -

$62

Mar. 2015 exp.

year-end 2015 WTI

price - $56

$/Barrel

Crop prices remain low, while cattle prices may have peaked.

21Sources: The Wall Street Journal, Chicago Board of Trade

U.S. CROP PRICESDollars per Bushel

2

4

6

8

10

12

14

16

18

1

2

3

4

5

6

7

8

9

Mar. '09 Mar. '11 Mar. '13 Mar. '15

Corn (left scale)

Soybeans (right scale)

U.S. LIVESTOCK PRICESDollars per Hundredweight

80

120

160

200

240

280

80

120

160

200

240

280

Mar. '09 Mar. '11 Mar. '13 Mar. '15

Feeder Cattle

Live Cattle

Note: Feeder Cattle are 750-800lbs

U.S. real net farm income is projected to decline in 2015.

22Source: USDA

0

20

40

60

80

100

120

140

1970 1980 1990 2000 2010

U.S. REAL NET FARM INCOME

Billions, 2009 Dollars

2015 Forecast

For additional information on the regional economy:

http://www.KansasCityFed.org/Denver