u.s. economic outlook...u.s. economic outlook west virginia university economic outlook conference...
TRANSCRIPT
U.S. Economic Outlook
West Virginia University Economic Outlook ConferenceNovember 8, 2017
R. Andrew BauerSenior Regional Economist
2
Real Gross Domestic Product
Source: Bureau of Economic Analysis via Haver Analytics
2017 Q3 Q4 Q1 Q2 Q3
CHANGE FROM PREVIOUS QUARTER AT COMPOUND ANNUAL RATE [Percent]:
Gross Domestic Product 2.8 1.8 1.2 3.1 3.0
Personal Consumption Expenditures 2.8 2.9 1.9 3.3 2.4
Nonresidential Fixed Investment 3.4 0.2 7.2 6.7 3.9Structures 14.3 -2.2 14.8 7.0 -5.2Equipment -2.1 1.8 4.4 8.8 8.6Intellectual Property 4.2 -0.4 5.7 3.7 4.3
Residential Fixed Investment -4.5 7.1 11.1 -7.3 -6.0
Exports of Goods & Services 6.4 -3.8 7.3 3.5 2.3Imports of Goods & Services 2.7 8.1 4.3 1.5 -0.8
Final Sales to Domestic Purchasers 2.2 2.3 2.4 2.7 1.8
LEVEL IN QUARTER AT SEASONALLY ADJUSTED ANNUAL RATE [Billions of Chained (2005) Dollars]:
Change in Private Inventories 17.6 63.1 1.2 5.5 35.8
Net Exports of Goods & Services -557.3 -631.1 -622.2 -613.6 -595.5
2016
-0.1Government Consumption Expenditures & Gross Investment
0.5 0.2 -0.6 -0.2
-9
-8
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
-9
-8
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Percent change from previous quarter at annual rate
Note: Projection is the median, central tendency, and range from the September 2017 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. 3
Q33.0%
Real Gross Domestic Product
Source: Bureau of Economic Analysis via Haver Analytics & Federal Reserve Board
FOMC Projection
4
Decomposition of Real GDP
Source: Bureau of Economic Analysis and Bureau of Labor Statistics via Haver Analytics
Note: Productivity is calculated as real GDP per employee, from the Household Survey.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014
Employment
Productivity
GDP
10-Year Annual Growth Rates
-14
-12
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
14
16
-14
-12
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
14
16
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
12 Month % Change
3 Month Annualized % Change
September4.4%
5
Retail Sales
Source: Census Bureau via Haver Analytics
Note: Retail sales includes food services.
Jul. Aug. Sep.Total 0.5 -0.1 1.6x Gasoline 0.6 -0.4 1.2
Month over Month % Change
-8
-6
-4
-2
0
2
4
6
8
-8
-6
-4
-2
0
2
4
6
8
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
12 Month % Change
Real Disposable Personal Income
Real Personal Consumption Expenditure
September
6
Consumer Spending and Income
Source: Bureau of Economic Analysis via Haver Analytics
July August SeptemberIncome 0.1 -0.1 0.0
Expenditures 0.3 -0.1 0.6
Month over Month % Change
Note: Income has been adjusted to account for temporary fiscal actions in 2008 and 2012-2013.
7
Sales of Automobiles & Light Trucks
Source: Autodata Corporation via Haver Analytics
4
6
8
10
12
14
16
18
20
4
6
8
10
12
14
16
18
20
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Millions of Vehicles
Autos and Light Trucks
September18.5 mil.
Light Trucks
Autos
8
Personal Saving Rate
Source: Bureau of Economic Analysis via Haver Analytics
0
1
2
3
4
5
6
7
8
9
10
0
1
2
3
4
5
6
7
8
9
10
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Percent of disposable personal income
September3.1%
Note: Income has been adjusted to account for temporary events
9
Household Net Worth
Source: Z.1 Financial Accounts of the United States via Haver Analytics
450
500
550
600
650
700
450
500
550
600
650
700
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Percent of disposable personal income
Q2
2.5
3
3.5
4
4.5
5
5.5
6
6.5
2.5
3
3.5
4
4.5
5
5.5
6
6.5
200020012002200320042005200620072008200920102011201220132014201520162017
10
Existing Single-Family Home Sales
Source: National Association of Realtors via Haver Analytics
September
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
11
New Single-Family Home Sales
Source: Census Bureau via Haver Analytics
September
12
Private Single-Family Housing Starts & Permits
Source: Census Bureau via Haver Analytics
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2000 2002 2004 2006 2008 2010 2012 2014 2016
1990 - 1999 Average Housing Starts
Permits
Starts September
Millions of Starts & Permits, Annual Rate
13
Private Multi-Family Housing Starts & Permits
Source: Census Bureau via Haver Analytics
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
1990 – 1999 Average Multi-Family Starts
Starts
Permits
September
3-Month Moving Average, Millions of Starts & Permits, Annual Rate
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
35
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
35
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Percent change from previous quarter at annual rate
14
Q3 -5.2%
Real Investment in Nonresidential Structures
Source: Bureau of Economic Analysis via Haver Analytics
15
Real Private Construction Put In Place
Source: Census Bureau via Haver Analytics
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.
220
270
320
370
420
470
520
570
620
670
220
270
320
370
420
470
520
570
620
670
2000 2002 2004 2006 2008 2010 2012 2014 2016
Real Private Residential Construction
Real Private Nonresidential Construction August
2009$, Billions
-30
-25
-20
-15
-10
-5
0
5
10
15
20
-30
-25
-20
-15
-10
-5
0
5
10
15
20
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Percent change from previous quarter at annual rate
16
Q33.9%
Real Nonresidential Fixed Investment
Source: Bureau of Economic Analysis via Haver Analytics
-40
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
35
-40
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
35
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Percent change from previous quarter at annual rate
17
Q38.6%
Real Investment in Equipment
Source: Bureau of Economic Analysis via Haver Analytics
-8
-6
-4
-2
0
2
4
6
8
10
12
-8
-6
-4
-2
0
2
4
6
8
10
12
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Percent change from previous quarter at annual rate
18
Q34.3%
Real Investment in Intellectual Property
Source: Bureau of Economic Analysis via Haver Analytics
19
Balance of International Trade
Source: Census Bureau via Haver Analytics
Note: Customs Value of Trade Balance
-80
-70
-60
-50
-40
-30
-20
-10
0
-80
-70
-60
-50
-40
-30
-20
-10
0
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Current $, Billions
PetroleumBalance
Trade Balance
Non- PetroleumBalance
August-42 Bil.
75
85
95
105
115
125
135
75
85
95
105
115
125
135
1980 1984 1988 1992 1996 2000 2004 2008 2012 2016
20
Exchange Value of the USDIndex, March 1973 = 100
Source: Board of Governors via Haver Analytics
Notes: Measured as the real broad trade-weighted exchange value of the United States Dollar.
September
21
Industrial Production
Source: Board of Governors via Haver Analytics
75
80
85
90
95
100
105
110
115
120
125
130
135
140
75
80
85
90
95
100
105
110
115
120
125
130
135
140
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Mining
Overall
Manufacturing
September
2012 = 100
22
Capacity Utilization Rate: Manufacturing
Source: Board of Governors via Haver Analytics
62
64
66
68
70
72
74
76
78
80
82
62
64
66
68
70
72
74
76
78
80
82
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Percent
September75.1%
23
Indexes of Manufacturing Activity
Source: Institute for Supply Management & Richmond Fed via Haver Analytics
-40
-30
-20
-10
0
10
20
30
40
35
40
45
50
55
60
65
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Diffusion Index, percent
ISM (Left Axis)
Richmond Fed Manufacturing Survey: Current
Conditions Composite Index (Right Axis)
September60.8
24
Indexes of Non-Manufacturing Activity
Source: Institute for Supply Management & Richmond Fed via Haver Analytics
-40
-30
-20
-10
0
10
20
30
40
35
40
45
50
55
60
65
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Diffusion Index, percent
ISM (Left Axis)
Richmond Fed Service Sector
Index: Revenues (Right Axis)
September59.8
Aug. Sep. Aug. Sep.
Purchasing Managers Index 58.8 60.8 Non-Manufacturing Index 55.3 59.8
Production 61.0 62.2 Business Activity 57.5 61.3
New Orders 60.3 64.6 New Orders 57.1 63.0
Employment 59.9 60.3 Employment 56.2 56.8
Supplier Deliveries 57.1 64.4 Supplier Deliveries 50.5 58.0
Inventories 55.5 52.5 Inventories 53.5 51.5
Prices 62.0 71.5 Prices 57.9 66.3
Backlog of Orders 57.5 58.0 Backlog of Orders 53.5 56.0
New Export Orders 55.5 57.0 New Export Orders 55.0 56.0
Imports 54.5 54.0 Imports 50.5 52.0
MANUFACTURING BUSINESS: NON-MANUFACTURING BUSINESS:
25DIFFUSION INDEXES: Numbers above 50 percent indicate more favorable responses towards economic activity.
ISM: Business Survey Indexes
Source: Institute for Supply Management via Haver Analytics
300
350
400
450
500
550
600
300
350
400
450
500
550
600
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
26
Manufacturers’ New Orders
Source: Census Bureau via Haver Analytics
August
New Orders
Shipments
27
Core Capital Goods
Notes: Core capital goods are nondefense capital goods excluding aircraft.
Source: Census Bureau via Haver Analytics
45
50
55
60
65
70
75
45
50
55
60
65
70
75
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
August
28
Business Inventory/Sales Ratio
Source: Census Bureau via Haver Analytics
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.1
1.2
1.3
1.4
1.5
1.6
1.7
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Percent
Total Business
Retailers
Manufacturers
August
29
Nonfarm Payroll Employment
Source: Bureau of Labor Statistics via Haver Analytics
120
125
130
135
140
145
150
120
125
130
135
140
145
150
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Millions of Persons
October147.01 mil.
30
Nonfarm Payroll Employment
Source: Bureau of Labor Statistics via Haver Analytics
-800
-700
-600
-500
-400
-300
-200
-100
0
100
200
300
400
-800
-700
-600
-500
-400
-300
-200
-100
0
100
200
300
400
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Quarterly average of monthly changes, thousands of persons
Q4
Sep -33Aug 169Jul 138Jun 210May 145
Monthly Change
31
Unemployment Rate
Source: Bureau of Labor Statistics & Board of Governors via Haver Analytics
Notes: FOMC projection is the median, range, and central tendency for the Q4 levels, from the September 2017 meeting. Red dots indicate median projections
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Percent
October4.1% FOMC Projection
32
Measures of Labor Utilization
Source: Bureau of Labor Statistics via Haver Analytics
3
6
9
12
15
18
3
6
9
12
15
18
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Percent
U3: Official Unemployment Rate
U6: U5 + Involuntary Part-Time
U5: U3 + Discouraged + Marginally Attached October
6
7
8
9
10
11
12
13
14
6
7
8
9
10
11
12
13
14
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Non-Employment Index Including People Working Part-Time for Economic Reasons
Non-Employment Index
Percent
33
Non-Employment Index
Based on “Measuring Resource Utilization in the Labor Market,” Andreas Hornstein, Marianna Kudlyak, and Fabian Lange, Federal Reserve Bank of Richmond Economic Quarterly, First Quarter 2014.
September
34
Labor Market Flows
Source: JOLTS via Haver Analytics
Note: *Percent of total employment. **Percent of total employment plus job openings.
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2000 2002 2004 2006 2008 2010 2012 2014 2016
Percent
Hires Rate*
Job Openings Rate**
Quits Rate*
August
35
Labor Force Participation
Source: Bureau of Labor Statistics via Haver Analytics
57
58
59
60
61
62
63
64
65
66
67
68
57
58
59
60
61
62
63
64
65
66
67
68
1948 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016
October
Percent of Population
36
Aggregate Weekly Hours Index
Source: Bureau of Labor Statistics via Haver Analytics
90
92
94
96
98
100
102
104
106
108
90
92
94
96
98
100
102
104
106
108
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
OctoberIndex, 2007=100
37
Average Hourly Earnings
Source: Bureau of Labor Statistics via Haver Analytics
1.0
1.5
2.0
2.5
3.0
3.5
4.0
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
October2.6%
12 Month % Change of 3-Month Moving Average
Oct 0.0%Sep 0.5%Aug 0.1%Jul 0.5%Jun 0.2%
Monthly % Change
Employment Cost Index
38Source: Bureau of Labor Statistics via Haver Analytics
1.0
1.5
2.0
2.5
3.0
3.5
4.0
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Year over Year % Change
Benefits Cost
Wages and Salaries
Total Compensation
Q3
-1
0
1
2
3
4
5
6
-1
0
1
2
3
4
5
6
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Year over Year % Change
Post-War Average(Labor Productivity)
39
Quarterly Change at Annual Rate
Labor Productivity, Nonfarm Business
Source: Bureau of Labor Statistics via Haver Analytics
Q2 17 1.5%Q1 17 0.1%Q4 16 1.3%Q3 16 2.5%
Q21.3%
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Year over Year % Change
Alternate Series
Q21.2%
40
Quarterly Change at Annual Rate
Unit Labor Cost, Nonfarm Business
Notes: Alternate series is derived from the Employment Cost Index.
Source: Bureau of Labor Statistics via Haver Analytics
Q2 17 0.2%Q1 17 4.8%Q4 16 -5.7%Q3 16 0.1%
Expenditure Price Indexes [Percent Change from Previous Month at Annual Rate]:
Aug. Sep. YoY %Personal Consumption Expenditures 2.5 4.6 1.6
Core (excludes Food and Energy) 1.2 1.6 1.3
Consumer Price Indexes [Percent Change from Previous Month at Annual Rate]:
Aug. Sep. YoY %All Items 4.9 6.8 2.2
Core (excludes Food and Energy) 3.0 1.5 1.7
Producer Price Indexes [Percent Change from Previous Month at Annual Rate]:
Aug. Sep. YoY %Finished Goods 5.6 9.5 3.2
Core (excludes Food and Energy) 1.2 1.8 1.7Core Intermediate Goods 4.5 1.9 3.1
Crude Goods -7.9 -4.4 7.0
Spot Commodity Price Index Aug. Sep. YoY %
CRB Spot Commodity Price Index -1.4 -1.9 6.2
[Percent Change from Previous Month]:
41
Gauges of Inflation
Source: BEA, BLS, & Commodity Research Bureau via Haver Analytics
Notes: Core PCE Price Index includes expenditures on food services.
42
Personal Consumption Expenditure Price Index
Source: Bureau of Economic Analysis & Board of Governors via Haver Analytics
Notes: FOMC projection is the median, range, and central tendency for Q4/Q4 percent changes, from the September 2017 meeting. Red dots indicate median projections.
-2
-1
0
1
2
3
4
5
-2
-1
0
1
2
3
4
5
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
12 Month % Change
2% Longer-run Target
FOMC ProjectionSeptember
1.6%
43
Core Personal Consumption Expenditure Price Index
Source: Bureau of Economic Analysis & Board of Governors via Haver Analytics
Notes: FOMC projection is the median, range, and central tendency for Q4/Q4 percent changes, from the September 2017 meeting. Red dots indicate median projections. Core PCE Price Index excludes expenditures on gasoline and food services.
-2
-1
0
1
2
3
4
5
-2
-1
0
1
2
3
4
5
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
12 Month % Change
12 month percentage change
FOMC Projection
September1.3%
-3
-2
-1
0
1
2
3
4
5
6
-3
-2
-1
0
1
2
3
4
5
6
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Core CPI
All Items
12 Month % Change
September
44
Consumer Price Indexes
Source: Bureau of Labor Statistics via Haver Analytics
August SeptemberCPI: All Items 0.4% 0.5%Core CPI 0.2% 0.1%
45
Producer Price Indexes
Source: Bureau of Labor Statistics via Haver Analytics
-8
-6
-4
-2
0
2
4
6
8
10
12
-8
-6
-4
-2
0
2
4
6
8
10
12
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
All Finished Goods
Core Finished Goods September
12 Month % Change
All Finished Goods 3.2%Core Finished Goods 1.7%
September (percent)
46
Commodity Price Indexes
Source: Bureau of Labor Statistics & Commodity Research Bureau via Haver Analytics
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
35
40
45
-21-18-15-12-9-6-30369
12151821242730
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Commodity Research Bureau Spot Commodity
Price Index(Right Axis)
PPI Core Intermediate
Processed Materials(Left Axis)
September
12 Month % Change 12 Month % Change
Price Indexes August SeptemberPPI Core Intermed. Goods 3.1% ---CRBS Spot Commodities 8.2% 6.2%
0
20
40
60
80
100
120
140
160
0
20
40
60
80
100
120
140
160
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Futures Price
Current US$/Barrel
Spot Price30-Oct-17
47
Crude Oil Prices
Source: Financial Times & New York Mercantile Exchange via Haver Analytics & Bloomberg
Notes: Spot and Futures Prices are for Brent Crude Oil.
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2009 2010 2011 2012 2013 2014 2015 2016 2017
5-Year5 Years Ahead
5-Year
Percent
48
October 20th
TIPS Inflation Compensation
Source: Federal Reserve Board /Haver Analytics
49
Federal Reserve System Assets
Source: Board of Governors via Haver Analytics
Note: Numbers may not add up due to rounding.
Treasury Securities:$1,652
Treasury Securities:$2,466
Agency MBS: $844
Agency MBS: $1,775
Agency Debt:$87
Agency Debt:$7
Miscellaneous: $282
Miscellaneous: $266
Total: $2,865
Total: $4,514
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
9/12/2012 10/25/2017
$, Billions
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Federal Funds Target Rate
Primary Credit Rate
Federal Funds Rate Target Range
Interest Rate Paid on Reserves
Percent
50
October 27th
Monetary Policy Instruments
Source: Board of Governors via Haver Analytics
-3
-2
-1
0
1
2
3
4
-3
-2
-1
0
1
2
3
4
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Percent
51
September
Real Federal Funds Rate
Source: Bureau of Economic Analysis & Board of Governors via Haver Analytics
Note: The Real Federal Funds Rate is the difference between the effect Fed Funds rate and the lagged year-over-yearchange in the core PCE price index.
52
FOMC Statement
Information received since the Federal Open Market Committee met in July indicates that the labor market has continued to strengthen and that economic activity has been rising moderately so far this year. Job gains have remained solid in recent months, and the unemployment rate has stayed low. Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters. On a 12-month basis, overall inflation and the measure excluding food and energy prices have declined this year and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Hurricanes Harvey, Irma, and Maria have devastated many communities, inflicting severe hardship. Storm-related disruptions and rebuilding will affect economic activity in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term. Consequently, the Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further. Higher prices for gasoline and some other items in the aftermath of the hurricanes will likely boost inflation temporarily; apart from that effect, inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee's 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.
In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.
Source: Board of Governors
September 20, 2017
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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. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant 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.
In October, the Committee will initiate the balance sheet normalization program described in the June 2017 Addendum to the Committee's Policy Normalization Principles and Plans.
Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Patrick Harker; Robert S. Kaplan; Neel Kashkari; and Jerome H. Powell.
Source: Board of Governors September 20th, 2017
September 20, 2017
October 30, 2017
0
0.5
1
1.5
2
2.5
3
3.5
4
0
0.5
1
1.5
2
2.5
3
3.5
4
2017 2018 2019 2020 2021 2022 2023 2024
Percent
54
Eurodollar Futures
Source: CME Group via Bloomberg
55
Summary of Economic Projections: Federal Funds Rate
Source: Board of Governors
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 September 2017 meeting.
0
1
2
3
4
5
0
1
2
3
4
5
2017 2018 2019 Longer run
Percent
2020
0
500
1000
1500
2000
2500
3000
3500
4000
4500
0
500
1000
1500
2000
2500
3000
3500
4000
4500
2009 2010 2011 2012 2013 2014 2015 2016 2017
Current $, Billions
56
October 25th
Monetary Base
Source: Board of Governors via Haver Analytics
0
1
2
3
4
5
6
7
8
9
10
11
0
1
2
3
4
5
6
7
8
9
10
11
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
12 Month % Change
57
M2
Source: Board of Governors via Haver Analytics
September
-0.25
0.00
0.25
0.50
0.75
1.00
1.25
1.50
1.75
2.00
-0.25
0.00
0.25
0.50
0.75
1.00
1.25
1.50
1.75
2009 2010 2011 2012 2013 2014 2015 2016 2017
IOER
Federal Funds Rate
Primary Credit Rate
3-Month LIBOR
3-Month T-Bill Fed Reverse Repo Rateon Treasuries
Percent
58
October 27th
Money Market Rates
Source: Board of Governors & Financial Times via Haver Analytics & Bloomberg
0
1
2
3
4
5
6
7
8
9
10
0
1
2
3
4
5
6
7
8
9
10
2009 2010 2011 2012 2013 2014 2015 2016 2017
Corporate BBBBond Rate
Corporate AAABond Rate
30-YearConventional
Mortgage Rate
10-Year TreasuryBond Rate
Percent
59
October 27th
Capital Market Rates
Source: BofA Merrill Lynch & Board of Governors via Haver Analytics
60
Treasury Yield Curve
Source: Board of Governors via Haver Analytics
0.00
0.25
0.50
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
0.00
0.25
0.50
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
6 M 2 Yrs 3 Yrs 5 Yrs 7 Yrs 10 Yrs
September 18, 2017 October 30, 2017
Percent
Time to Maturity
0
1
2
3
4
5
6
7
8
0
1
2
3
4
5
6
7
8
2009 2010 2011 2012 2013 2014 2015 2016 2017
10 Year Rolling Average Risk Premium
Percent
61
Risk Premium
Source: BofA Merrill Lynch & Board of Governors via Haver Analytics
October 27th
Note: Risk Premium is defined as the difference in yields between BofA Merrill Lynch BBB and 10-year Treasury.
The views expressed here are those of the author, and do not necessarily represent those of the Federal Reserve Bank of Richmond or the Federal Reserve System.
62