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Yellen Calms Fears Fed’s Policy Trigger Finger Is Getting Itchy
by Rich Miller, Christopher Condon , and Jeanna Smialek
March 15, 2017, 1:00 PM CDT March 15, 2017, 5:02 PM CDT
Policy makers still project three total rate hikes for 2017
FOMC sticks with ‘gradual’ plan for removing accommodation
Fed Raises Benchmark Lending Rate a Quarter Point
Federal Reserve Chair Janet Yellen sought to reassure investors that the central bank’s latest interest-rate increase wasn’t a paradigm shift to a trigger-happy policy driven by fears of faster inflation.
Speaking to reporters after the Fed’s quarter percentage-point move on Wednesday, Yellen said the central bank was willing to tolerate inflation temporarily overshootingits 2 percent goal and that it intended to keep its policy accommodative for “some time.”
“The simple message is the economy’s doing well. We have confidence in the robustness of the economy and its resilience to shocks,” she said.
As a result, the Fed is sticking with its policy of gradually raising interest rates, Yellen said. In their first forecasts in three months, Fed policy makers penciled in two more quarter-point rate increases this year and three in 2018, unchanged from their projections in December.
Today’s decision “does not represent a reassessment of the economic outlook or of the appropriate course for monetary policy,” the Fed chief said.
Speculation of a more aggressive Fed had mounted in recent days after a host of central bank officials, including Yellen herself, went out of their way to telegraph to financial markets that a rate hike was imminent. The expectations were further fueled by news of rising inflation.
Stocks Advance
Stocks rose and bond yields fell as investors viewed the statement from the Federal Open Market Committee and Yellen’s remarks afterward as a sign that the Fed isn’t in a hurry to remove monetary stimulus. The FOMC raised the target range for the federal funds rate to 0.75 percent to 1 percent, as expected, but Yellen’s lack of urgency to snuff out inflation was a surprise.
R.J. Gallo, a fixed-income investment manager at Federated Investors in Pittsburgh, said the chorus of Fed speakers before this meeting led investors to expect a move up in the number of projected rate hikes this year, and even upgrades by Fed officials in the levels of inflation and growth they anticipated.
None of that materialized.
“You didn’t get any of those things,” Gallo said, which explains why Treasury yields quickly dropped after the Fed released the FOMC statement and a new set of economic projections. “The expectation that Fed was getting more hawkish had to come out of the market.”
The U.S. economy has mostly met the central bank’s goals of full employment and stable prices, and may get further support if President Donald Trump delivers promised fiscal stimulus. Investor and business confidence has soared since Trump won the presidency in November, buoyed by his vows to cut taxes, lift infrastructure spending and ease regulations.
Still, the data don’t show an economy that’s heating up rapidly — a point Yellen herself made after the third rate hike since the 2007-2009 recession ended. In fact, the economy may have “more room to run,” she said.
Stronger business and consumer confidence hasn’t yet translated into increased investment and spending, said Yellen.
“It’s uncertain just how much sentiment actually impacts spending decisions, and I wouldn’t say at this point that I have seen hard evidence of any change in spending decisions,” said the Fed Chair. “Most of the business people that we’ve talked to also have a wait-and-see attitude.”
Retail sales in February grew at the slowest pace since August, a government report showed earlier Wednesday. The Atlanta Fed’s model for GDP predicts an expansion of 0.9 percent in the first quarter, less than a third the pace Trump is aiming for.
Fiscal Stimulus
Asked about the potential for a fiscal boost, Yellen made clear the Fed is still waiting for more concrete policy plans to emerge from the Trump administration before adapting monetary policy in reaction.
“There is great uncertainty about the timing, the size and the character of policy changes that may be put in place,” Yellen said. “I don’t think that’s a decision or set of decisions that we need to make until we know more about what policy changes will go into effect.”
Yellen disputed suggestions that the Fed was on a collision course with the Trump administration over its plans to foster faster economic growth through tax cuts and deregulation. “We would welcome stronger economic growth in the context of price stability,” she said.
She said she had met Trump briefly and had gotten together a couple of times with Treasury Secretary Steven Mnuchin to discuss the economy and financial regulation.
Further underscoring their lack of urgency, Fed officials repeated a commitment to maintain their balance-sheet reinvestment policy until rate increases were well under way. Yellen said officials had discussed the process of reducing the balance sheet gradually, but had made no decisions and would continue to debate the topic.
Policy makers forecast inflation will reach 1.9 percent in the fourth quarter this year, and 2 percent in both 2018 and 2019, according to quarterly median estimates released with the FOMC statement. The Fed’s preferred measure of inflation rose 1.9 percent in the 12 months through January, just shy of its target.
Yellen pointed out, though, that core inflation continues to run somewhat further below 2 percent. That rate, which strips out food and energy costs, stood at 1.7 percent in January. The Fed’s new forecast for the core rate at the end of this year edged up to 1.9 percent, from 1.8 percent in December.
“The committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal,” the Fed said. Discussing the word symmetric in the statement, Yellen said during her press conference that the Fed was not shooting to push inflation over 2 percent but recognized that it could temporarily go above it. Two percent is a target, she reiterated, not a ceiling.
By Evan Tarver | Updated March 10, 2017 — 3:35 PM EST
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Changes in the federal funds rate will always affect the U.S. dollar. When the Federal Reserve increases the federal funds rate, it normally reduces inflationary pressure and works to appreciate the dollar.
Since June 2006, however, the Fed has maintained a federal funds rate of close to 0%. In the wake of the 2008 financial crisis, the federal funds rate fluctuated between 0-0.25%, and is now 0.75%.
The Fed used this monetary policy to help achieve maximum employment and stable prices. Now that the 2008 financial crisis has largely subsided, the Fed will look to increase interest rates to continue to achieve employment and to stabilize prices.
Inflation of the U.S. Dollar
The best way to achieve full employment and stable prices is to set the inflation rate of the dollar at 2%. In 2011, the Fed officially adopted a 2% annual increase in the price index for personal consumption expenditures as its target. When the economy is weak, inflation naturally falls; when the economy is strong, rising wages increase inflation. Keeping inflation at a growth rate of 2% helps the economy grow at a healthy rate.
Adjustments to the federal funds rate can also affect inflation in the United States. The Fed controls the economy by increasing interest rates when the economy is growing too fast. This encourages people to save more and spend less, reducing inflationary pressure. Conversely, when the economy is in a recession or growing too slowly, the Fed reduces interest rates to stimulate spending, which increases inflation.
During the 2008 financial crisis, the low federal funds rate should have increased inflation. Over this period, the federal funds rate was set near 0%, which encouraged spending and would normally increase inflation.
However, inflation is still well below the 2% target, which is contrary to the normal effects of low interest rates. The Fed cites one-off factors, such as falling oil prices and the strengthening dollar, as the reasons why inflation has remained low in a low interest environment.
The Fed believes that these factors will eventually fade and that inflation will increase above the target 2%. To prevent this eventual increase in inflation, hiking the federal funds rate reduces inflationary pressure and cause inflation of the dollar to remain around 2%.
Appreciation of the U.S. Dollar
Increases in the federal funds rate also result in a strengthening of the U.S. dollar. Other ways that the dollar can appreciate include increases in average wages and increases in overall consumption. However, although jobs are being created, wage rates are stagnant.
Without an increase in wage rates to go along with a strengthening job market, consumption won’t increase enough to sustain economic growth. Additionally, consumption remains subdued due to the fact that the labor force participation rate was close to its 35-year low in 2015. The Fed has kept interest rates low because a lower federal funds rate supports business expansions, which leads to more jobs and higher consumption. This has all worked to keep appreciation of the U.S. dollar low.
However, the U.S. is ahead of the other developed markets in terms of its economic recovery. Although the Fed raises rates cautiously, the U.S. could see higher interest rates before the other developed economies.
Overall, under normal economic conditions, increases in the federal funds rate reduce inflation and increase the appreciation of the U.S. dollar.
Not to be confused with economic repression, a type of political repression.
Financial repression refers to “policies that result in savers earning returns below the rate of inflation” in order to allow banks to “provide cheap loans to companies and governments, reducing the burden of repayments”.[1] It can be particularly effective at liquidating government debtdenominated in domestic currency.[2] It can also lead to a large expansions in debt “to levels evoking comparisons with the excesses that generated Japan’s lost decade and the Asian financial crisis” in 1997.[1]
Creation or maintenance of a captive domestic market for government debt, achieved by requiring banks to hold government debt via capital requirements, or by prohibiting or disincentivising alternatives.
Government restrictions on the transfer of assets abroad through the imposition of capital controls.
These measures allow governments to issue debt at lower interest rates. A low nominal interest rate can reduce debt servicing costs, while negative real interest rates erodes the real value of government debt.[5] Thus, financial repression is most successful in liquidating debts when accompanied by inflation and can be considered a form of taxation,[6] or alternatively a form of debasement.[7]
The size of the financial repression tax for 24 emerging markets from 1974 to 1987. Their results showed that financial repression exceeded 2% of GDP for seven countries, and greater than 3% for five countries. For five countries (India, Mexico, Pakistan, Sri Lanka, and Zimbabwe) it represented approximately 20% of tax revenue. In the case of Mexico financial repression was 6% of GDP, or 40% of tax revenue.[8]
Financial repression is categorized as “macroprudential regulation“—i.e., government efforts to “ensure the health of an entire financial system.[2]
Examples
After World War II
Financial repression “played an important role in reducing debt-to-GDP ratios after World War II” by keeping real interest rates for government debt below 1% for two-thirds of the time between 1945 and 1980, the United States was able to “inflate away” the large debt (122% of GDP) left over from the Great Depression and World War II.[2] In the UK, government debt declined from 216% of GDP in 1945 to 138% ten years later in 1955.[9]
China
China‘s economic growth has been attributed to financial repression thanks to “low returns on savings and the cheap loans that it makes possible”. This has allowed China to rely on savings-financed investments for economic growth. However, because low returns also dampens consumer spending, household expenditures account for “a smaller share of GDP in China than in any other major economy”.[1] However, as of December 2014, the People’s Bank of China “started to undo decades of financial repression” and the government now allows Chinese savers to collect up to a 3.3% return on one-year deposits. At China’s 1.6% inflation rate, this is a “high real-interest rate compared to other major economies”.[1]
After the 2008 economic recession
In a 2011 NBER working paper, Carmen Reinhart and Maria Belen Sbrancia speculate on a possible return by governments to this form of debt reduction in order to deal with high debt levels following the 2008 economic crisis.[5]
Critics[who?] argue that if this view was true, investors (i.e., capital-seeking parties) would be inclined to demand capital in large quantities and would be buying capital goods from this capital. This high demand for capital goods would certainly lead to inflation and thus the central banks would be forced to raise interest rates again. As a boom pepped by low interest rates fails to appear these days in industrialized countries, this is a sign that the low interest rates seem to be necessary to ensure an equilibrium on the capital market, thus to balance capital-supply—i.e., savers—on one side and capital-demand—i.e., investors and the government—on the other. This view argues that interest rates would be even lower if it were not for the high government debt ratio (i.e., capital demand from the government).
Free-market economists argue that financial repression crowds out private-sector investment, thus undermining growth. On the other hand, “postwar politicians clearly decided this was a price worth paying to cut debt and avoid outright default or draconian spending cuts. And the longer the gridlock over fiscal reform rumbles on, the greater the chance that ‘repression’ comes to be seen as the least of all evils”.[11]
Also, financial repression has been called a “stealth tax” that “rewards debtors and punishes savers—especially retirees” because their investments will no longer generate the expected return, which is income for retirees.[10][12] “One of the main goals of financial repression is to keep nominal interest rates lower than they would be in more competitive markets. Other things equal, this reduces the government’s interest expenses for a given stock of debt and contributes to deficit reduction. However, when financial repression produces negative real interest rates (nominal rates below the inflation rate), it reduces or liquidates existing debts and becomes the equivalent of a tax—a transfer from creditors (savers) to borrowers, including the government.”[2]
The interest rate that the borrowing bank pays to the lending bank to borrow the funds is negotiated between the two banks, and the weighted average of this rate across all such transactions is the federal funds effective rate.
The federal funds target rate is determined by a meeting of the members of the Federal Open Market Committee which normally occurs eight times a year about seven weeks apart. The committee may also hold additional meetings and implement target rate changes outside of its normal schedule.
Financial Institutions are obligated by law to maintain certain levels of reserves, either as reserves with the Fed or as vault cash. The level of these reserves is determined by the outstanding assets and liabilities of each depository institution, as well as by the Fed itself, but is typically 10%[4] of the total value of the bank’s demand accounts (depending on bank size). In the range of $9.3 million to $43.9 million, for transaction deposits (checking accounts, NOWs, and other deposits that can be used to make payments) the reserve requirement in 2007-2008 was 3 percent of the end-of-the-day daily average amount held over a two-week period. Transaction deposits over $43.9 million held at the same depository institution carried a 10 percent reserve requirement.
For example, assume a particular U.S. depository institution, in the normal course of business, issues a loan. This dispenses money and decreases the ratio of bank reserves to money loaned. If its reserve ratio drops below the legally required minimum, it must add to its reserves to remain compliant with Federal Reserve regulations. The bank can borrow the requisite funds from another bank that has a surplus in its account with the Fed. The interest rate that the borrowing bank pays to the lending bank to borrow the funds is negotiated between the two banks, and the weighted average of this rate across all such transactions is the federal funds effective rate.
The nominal rate is a target set by the governors of the Federal Reserve, which they enforce by open market operations and adjusting the interest paid on required and excess reserve balances. That nominal rate is almost always what is meant by the media referring to the Federal Reserve “changing interest rates.” The actual federal funds rate generally lies within a range of that target rate, as the Federal Reserve cannot set an exact value through open market operations.
Another way banks can borrow funds to keep up their required reserves is by taking a loan from the Federal Reserve itself at the discount window. These loans are subject to audit by the Fed, and the discount rate is usually higher than the federal funds rate. Confusion between these two kinds of loans often leads to confusion between the federal funds rate and the discount rate. Another difference is that while the Fed cannot set an exact federal funds rate, it does set the specific discount rate.
The federal funds rate target is decided by the governors at Federal Open Market Committee (FOMC) meetings. The FOMC members will either increase, decrease, or leave the rate unchanged depending on the meeting’s agenda and the economic conditions of the U.S. It is possible to infer the market expectations of the FOMC decisions at future meetings from the Chicago Board of Trade (CBOT) Fed Funds futures contracts, and these probabilities are widely reported in the financial media.
Applications
Interbank borrowing is essentially a way for banks to quickly raise money. For example, a bank may want to finance a major industrial effort but may not have the time to wait for deposits or interest (on loan payments) to come in. In such cases the bank will quickly raise this amount from other banks at an interest rate equal to or higher than the Federal funds rate.
Raising the federal funds rate will dissuade banks from taking out such inter-bank loans, which in turn will make cash that much harder to procure. Conversely, dropping the interest rates will encourage banks to borrow money and therefore invest more freely.[5] This interest rate is used as a regulatory tool to control how freely the U.S. economy operates.
By setting a higher discount rate the Federal Bank discourages banks from requisitioning funds from the Federal Bank, yet positions itself as a lender of last resort.
Comparison with LIBOR
Though the London Interbank Offered Rate (LIBOR) and the federal funds rate are concerned with the same action, i.e. interbank loans, they are distinct from one another, as follows:
The target federal funds rate is a target interest rate that is set by the FOMC for implementing U.S. monetary policies.
The (effective) federal funds rate is achieved through open market operations at the Domestic Trading Desk at the Federal Reserve Bank of New York which deals primarily in domestic securities (U.S. Treasury and federal agencies’ securities).[6]
LIBOR is based on a questionnaire where a selection of banks guess the rates at which they could borrow money from other banks.
LIBOR may or may not be used to derive business terms. It is not fixed beforehand and is not meant to have macroeconomic ramifications.[7]
Predictions by the market
Considering the wide impact a change in the federal funds rate can have on the value of the dollar and the amount of lending going to new economic activity, the Federal Reserve is closely watched by the market. The prices of Option contracts on fed funds futures (traded on the Chicago Board of Trade) can be used to infer the market’s expectations of future Fed policy changes. Based on CME Group 30-Day Fed Fund futures prices, which have long been used to express the market’s views on the likelihood of changes in U.S. monetary policy, the CME Group FedWatch tool allows market participants to view the probability of an upcoming Fed Rate hike. One set of such implied probabilities is published by the Cleveland Fed.
As of December 16, 2008, the most recent change the FOMC has made to the funds target rate is a 75 to 100 basis point cut from 1.0% to a range of zero to 0.25%. According to Jack A. Ablin, chief investment officer at Harris Private Bank, one reason for this unprecedented move of having a range, rather than a specific rate, was because a rate of 0% could have had problematic implications for money market funds, whose fees could then outpace yields.[8] This followed the 50 basis point cut on October 29, 2008, and the unusually large 75 basis point cut made during a special January 22, 2008 meeting, as well as a 50 basis point cut on January 30, 2008, a 75 basis point cut on March 18, 2008, and a 50 basis point cut on October 8, 2008.[9]
Explanation of federal funds rate decisions
When the Federal Open Market Committee wishes to reduce interest rates they will increase the supply of money by buying government securities. When additional supply is added and everything else remains constant, price normally falls. The price here is the interest rate (cost of money) and specifically refers to the Federal Funds Rate. Conversely, when the Committee wishes to increase the Fed Funds Rate, they will instruct the Desk Manager to sell government securities, thereby taking the money they earn on the proceeds of those sales out of circulation and reducing the money supply. When supply is taken away and everything else remains constant, price (or in this case interest rates) will normally rise.[10]
The Federal Reserve has responded to a potential slow-down by lowering the target federal funds rate during recessions and other periods of lower growth. In fact, the Committee’s lowering has recently predated recessions,[9] in order to stimulate the economy and cushion the fall. Reducing the Fed Funds Rate makes money cheaper, allowing an influx of credit into the economy through all types of loans.
The charts linked below show the relation between S&P 500 and interest rates.
Bill Gross of PIMCO suggested that in the prior 15 years ending in 2007, in each instance where the fed funds rate was higher than the nominal GDP growth rate, assets such as stocks and/or housing fell.[24]
This article’s lead section may not adequately summarize key points of its contents. Please consider expanding the lead to provide an accessible overview of all important aspects of the article. Please discuss this issue on the article’s talk page.(September 2010)
Monetary policy concerns the actions of a central bank or other regulatory authorities that determine the size and rate of growth of the money supply.
In the United States, the Federal Reserve is in charge of monetary policy, and implements it primarily by performing operations that influence short-term interest rates.
The money supply has different components, generally broken down into “narrow” and “broad” money, reflecting the different degrees of liquidity (‘spendability’) of each different type, as broader forms of money can be converted into narrow forms of money (or may be readily accepted as money by others, such as personal checks).[1]
For example, demand deposits are technically promises to pay on demand, while savings deposits are promises to pay subject to some withdrawal restrictions, and Certificates of Deposit are promises to pay only at certain specified dates; each can be converted into money, but “narrow” forms of money can be converted more readily. The Federal Reserve directly controls only the most narrow form of money, physical cash outstanding along with the reserves of banks throughout the country (known as M0 or the monetary base); the Federal Reserve indirectly influences the supply of other types of money.[1]
Broad money includes money held in deposit balances in banks and other forms created in the financial system. Basic economics also teaches that the money supply shrinks when loans are repaid;[2][3] however, the money supply will not necessarily decrease depending on the creation of new loans and other effects. Other than loans, investment activities of commercial banks and the Federal Reserve also increase and decrease the money supply.[4] Discussion of “money” often confuses the different measures and may lead to misguided commentary on monetary policy and misunderstandings of policy discussions.[5]
Monetary policy in the US is determined and implemented by the US Federal Reserve System, commonly referred to as the Federal Reserve. Established in 1913 by the Federal Reserve Act to provide central banking functions,[6] the Federal Reserve System is a quasi-public institution. Ostensibly, the Federal Reserve Banks are 12 private banking corporations;[7][8][9] they are independent in their day-to-day operations, but legislatively accountable to Congress through the auspices of Federal Reserve Board of Governors.
The Board of Governors is an independent governmental agency consisting of seven officials and their support staff of over 1800 employees headquartered in Washington, D.C.[10] It is independent in the sense that the Board currently operates without official obligation to accept the requests or advice of any elected official with regard to actions on the money supply,[11]and its methods of funding also preserve independence. The Governors are nominated by the President of the United States, and nominations must be confirmed by the U.S. Senate.[12]
The presidents of the Federal Reserve Banks are nominated by each bank’s respective Board of Directors, but must also be approved by the Board of Governors of the Federal Reserve. The Chairman of the Federal Reserve Board is generally considered to have the most important position, followed by the president of the Federal Reserve Bank of New York.[12] The Federal Reserve System is primarily funded by interest collected on their portfolio of securities from the US Treasury, and the Fed has broad discretion in drafting its own budget,[13] but, historically, nearly all the interest the Federal Reserve collects is rebated to the government each year.[14]
The Federal Reserve has three main mechanisms for manipulating the money supply. It can buy or sell treasury securities. Selling securities has the effect of reducing the monetary base (because it accepts money in return for purchase of securities), taking that money out of circulation. Purchasing treasury securities increases the monetary base (because it pays out hard currency in exchange for accepting securities). Secondly, the discount rate can be changed. And finally, the Federal Reserve can adjust the reserve requirement, which can affect the money multiplier; the reserve requirement is adjusted only infrequently, and was last adjusted in 1992.[15]
In practice, the Federal Reserve uses open market operations to influence short-term interest rates, which is the primary tool of monetary policy. The federal funds rate, for which the Federal Open Market Committee announces a target on a regular basis, reflects one of the key rates for interbank lending. Open market operations change the supply of reserve balances, and the federal funds rate is sensitive to these operations.[16]
In theory, the Federal Reserve has unlimited capacity to influence this rate, and although the federal funds rate is set by banks borrowing and lending funds to each other, the federal funds rate generally stays within a limited range above and below the target (as participants are aware of the Fed’s power to influence this rate).
Assuming a closed economy, where foreign capital or trade does not affect the money supply, when money supply increases, interest rates go down. Businesses and consumers have a lower cost of capital and can increase spending and capital improvement projects. This encourages short-term growth. Conversely, when the money supply falls, interest rates go up, increasing the cost of capital and leading to more conservative spending and investment. The Federal reserve increases interest rates to combat Inflation.
When money is deposited in a bank, it can then be lent out to another person. If the initial deposit was $100 and the bank lends out $100 to another customer the money supply has increased by $100. However, because the depositor can ask for the money back, banks have to maintain minimum reserves to service customer needs. If the reserve requirement is 10% then, in the earlier example, the bank can lend $90 and thus the money supply increases by only $90. The reserve requirement therefore acts as a limit on this multiplier effect. Because the reserve requirement only applies to the more narrow forms of money creation (corresponding to M1), but does not apply to certain types of deposits (such as time deposits), reserve requirements play a limited role in monetary policy.[17]
Currently, the US government maintains over US$800 billion in cash money (primarily Federal Reserve Notes) in circulation throughout the world,[18][19] up from a sum of less than $30 billion in 1959. Below is an outline of the process which is currently used to control the amount of money in the economy. The amount of money in circulation generally increases to accommodate money demanded by the growth of the country’s production. The process of money creation usually goes as follows:
Banks go through their daily transactions. Of the total money deposited at banks, significant and predictable proportions often remain deposited, and may be referred to as “core deposits.” Banks use the bulk of “non-moving” money (their stable or “core” deposit base) by loaning it out.[20] Banks have a legal obligation to keep a certain fraction of bank deposit money on-hand at all times.[21]
In order to raise additional money to cover excess spending, Congress increases the size of the National Debt by issuing securities typically in the form of a Treasury Bond[22] (see United States Treasury security). It offers the Treasury security for sale, and someone pays cash to the government in exchange. Banks are often the purchasers of these securities, and these securities currently play a crucial role in the process.
The 12-person Federal Open Market Committee, which consists of the heads of the Federal Reserve System (the seven Federal governors and five bank presidents), meets eight times a year to determine how they would like to influence the economy.[23] They create a plan called the country’s “monetary policy” which sets targets for things such as interest rates.[24]
Every business day, the Federal Reserve System engages in Open market operations.[25] If the Federal Reserve wants to increase the money supply, it will buy securities (such as U.S. Treasury Bonds) anonymously from banks in exchange for dollars. If the Federal Reserve wants to decrease the money supply, it will sell securities to the banks in exchange for dollars, taking those dollars out of circulation.[26][27] When the Federal Reserve makes a purchase, it credits the seller’s reserve account (with the Federal Reserve). The money that it deposits into the seller’s account is not transferred from any existing funds, therefore it is at this point that the Federal Reserve has created High-powered money.
By means of open market operations, the Federal Reserve affects the free reserves of commercial banks in the country.[28] Anna Schwartz explains that “if the Federal Reserve increases reserves, a single bank can make loans up to the amount of its excess reserves, creating an equal amount of deposits”.[26][27][29]
Since banks have more free reserves, they may loan out the money, because holding the money would amount to accepting the cost of foregone interest[28][30] When a loan is granted, a person is generally granted the money by adding to the balance on their bank account.[31]
This is how the Federal Reserve’s high-powered money is multiplied into a larger amount of broad money, through bank loans; as written in a particular case study, “as banks increase or decrease loans, the nation’s (broad) money supply increases or decreases.”[3] Once granted these additional funds, the recipient has the option to withdraw physical currency (dollar bills and coins) from the bank, which will reduce the amount of money available for further on-lending (and money creation) in the banking system.[32]
In many cases, account-holders will request cash withdrawals, so banks must keep a supply of cash handy. When they believe they need more cash than they have on hand, banks can make requests for cash with the Federal Reserve. In turn, the Federal Reserve examines these requests and places an order for printed money with the US Treasury Department.[33] The Treasury Department sends these requests to the Bureau of Engraving and Printing (to make dollar bills) and the Bureau of the Mint (to stamp the coins).
The U.S. Treasury sells this newly printed money to the Federal Reserve for the cost of printing.[citation needed] This is about 6 cents per bill for any denomination.[34] Aside from printing costs, the Federal Reserve must pledge collateral (typically government securities such as Treasury bonds) to put new money, which does not replace old notes, into circulation.[35]This printed cash can then be distributed to banks, as needed.
Though the Federal Reserve authorizes and distributes the currency printed by the Treasury (the primary component of the narrow monetary base), the broad money supply is primarily created by commercial banks through the money multiplier mechanism.[29][31][36][37] One textbook summarizes the process as follows:
“The Fed” controls the money supply in the United States by controlling the amount of loans made by commercial banks. New loans are usually in the form of increased checking account balances, and since checkable deposits are part of the money supply, the money supply increases when new loans are made …[38]
This type of money is convertible into cash when depositors request cash withdrawals, which will require banks to limit or reduce their lending.[39][32] The vast majority of the broad money supply throughout the world represents current outstanding loans of banks to various debtors.[38][40][41] A very small amount of U.S. currency still exists as “United States Notes“, which have no meaningful economic difference from Federal Reserve notes in their usage, although they departed significantly in their method of issuance into circulation. The currency distributed by the Federal Reserve has been given the official designation of “Federal Reserve Notes.”[42]
In 2005, the Federal Reserve held approximately 9% of the national debt[43] as assets against the liability of printed money. In previous periods, the Federal Reserve has used other debt instruments, such as debt securities issued by private corporations. During periods when the national debt of the United States has declined significantly (such as happened in fiscal years 1999 and 2000), monetary policy and financial markets experts have studied the practical implications of having “too little” government debt: both the Federal Reserve and financial markets use the price information, yield curve and the so-called risk free rate extensively.[44]
Experts are hopeful that other assets could take the place of National Debt as the base asset to back Federal Reserve notes, and Alan Greenspan, long the head of the Federal Reserve, has been quoted as saying, “I am confident that U.S. financial markets, which are the most innovative and efficient in the world, can readily adapt to a paydown of Treasury debt by creating private alternatives with many of the attributes that market participants value in Treasury securities.”[45] In principle, the government could still issue debt securities in significant quantities while having no net debt, and significant quantities of government debt securities are also held by other government agencies.
Although the U.S. government receives income overall from seigniorage, there are costs associated with maintaining the money supply.[41][46] Leading ecological economist and steady-state theoristHerman Daly, claims that “over 95% of our [broad] money supply [in the United States] is created by the private banking system (demand deposits) and bears interest as a condition of its existence,”[41] a conclusion drawn from the Federal Reserve’s ultimate dependence on increased activity in fractional reserve lending when it exercises open market operations.[47]Economist Eric Miller criticizes Daly’s logic because money is created in the banking system in response to demand for the money,[48] which justifies cost.[citation needed]
Thus, use of expansionary open market operations typically generates more debt in the private sector of society (in the form of additional bank deposits).[49] The private banking system charges interest to borrowers as a cost to borrow the money.[3][31][50] The interest costs are borne by those that have borrowed,[3][31] and without this borrowing, open market operations would be unsuccessful in maintaining the broad money supply,[30] though alternative implementations of monetary policy could be used. Depositors of funds in the banking system are paid interest on their savings (or provided other services, such as checking account privileges or physical security for their “cash”), as compensation for “lending” their funds to the bank.
Increases (or contractions) of the money supply corresponds to growth (or contraction) in interest-bearing debt in the country.[3][30][41] The concepts involved in monetary policy may be widely misunderstood in the general public, as evidenced by the volume of literature on topics such as “Federal Reserve conspiracy” and “Federal Reserve fraud.”[51]
Uncertainties
A few of the uncertainties involved in monetary policy decision making are described by the federal reserve:[52]
While these policy choices seem reasonably straightforward, monetary policy makers routinely face certain notable uncertainties. First, the actual position of the economy and growth in aggregate demand at any time are only partially known, as key information on spending, production, and prices becomes available only with a lag. Therefore, policy makers must rely on estimates of these economic variables when assessing the appropriate course of policy, aware that they could act on the basis of misleading information. Second, exactly how a given adjustment in the federal funds rate will affect growth in aggregate demand—in terms of both the overall magnitude and the timing of its impact—is never certain. Economic models can provide rules of thumb for how the economy will respond, but these rules of thumb are subject to statistical error. Third, the growth in aggregate supply, often called the growth in potential output, cannot be measured with certainty.
In practice, as previously noted, monetary policy makers do not have up-to-the-minute information on the state of the economy and prices. Useful information is limited not only by lags in the collection and availability of key data but also by later revisions, which can alter the picture considerably. Therefore, although monetary policy makers will eventually be able to offset the effects that adverse demand shocks have on the economy, it will be some time before the shock is fully recognized and—given the lag between a policy action and the effect of the action on aggregate demand—an even longer time before it is countered. Add to this the uncertainty about how the economy will respond to an easing or tightening of policy of a given magnitude, and it is not hard to see how the economy and prices can depart from a desired path for a period of time.
The statutory goals of maximum employment and stable prices are easier to achieve if the public understands those goals and believes that the Federal Reserve will take effective measures to achieve them.
Although the goals of monetary policy are clearly spelled out in law, the means to achieve those goals are not. Changes in the FOMC’s target federal funds rate take some time to affect the economy and prices, and it is often far from obvious whether a selected level of the federal funds rate will achieve those goals.
Opinions of the Federal Reserve
The Federal Reserve is lauded by some economists, while being the target of scathing criticism by other economists, legislators, and sometimes members of the general public. The former Chairman of the Federal Reserve Board, Ben Bernanke, is one of the leading academic critics of the Federal Reserve’s policies during the Great Depression.[53]
Achievements
One of the functions of a central bank is to facilitate the transfer of funds through the economy, and the Federal Reserve System is largely responsible for the efficiency in the banking sector. There have also been specific instances which put the Federal Reserve in the spotlight of public attention. For instance, after the stock market crash in 1987, the actions of the Fed are generally believed to have aided in recovery. Also, the Federal Reserve is credited for easing tensions in the business sector with the reassurances given following the 9/11 terrorist attacks on the United States.[54]
Criticisms
The Federal Reserve has been the target of various criticisms, involving: accountability, effectiveness, opacity, inadequate banking regulation, and potential market distortion. Federal Reserve policy has also been criticized for directly and indirectly benefiting large banks instead of consumers. For example, regarding the Federal Reserve’s response to the 2007–2010 financial crisis, Nobel laureate Joseph Stiglitz explained how the U.S. Federal Reserve was implementing another monetary policy —creating currency— as a method to combat the liquidity trap.[55]
By creating $600 billion and inserting this directly into banks the Federal Reserve intended to spur banks to finance more domestic loans and refinance mortgages. However, banks instead were spending the money in more profitable areas by investing internationally in emerging markets. Banks were also investing in foreign currencies which Stiglitz and others point out may lead to currency wars while China redirects its currency holdings away from the United States.[56]
Auditing
The Federal Reserve is subject to different requirements for transparency and audits than other government agencies, which its supporters claim is another element of the Fed’s independence. Although the Federal Reserve has been required by law to publish independently auditedfinancial statements since 1999, the Federal Reserve is not audited in the same way as other government agencies. Some confusion can arise because there are many types of audits, including: investigative or fraud audits; and financial audits, which are audits of accounting statements; there are also compliance, operational, and information system audits.
The Federal Reserve’s annual financial statements are audited by an outside auditor. Similar to other government agencies, the Federal Reserve maintains an Office of the Inspector General, whose mandate includes conducting and supervising “independent and objective audits, investigations, inspections, evaluations, and other reviews of Board programs and operations.”[57] The Inspector General’s audits and reviews are available on the Federal Reserve’s website.[58][59]
The Government Accountability Office (GAO) has the power to conduct audits, subject to certain areas of operations that are excluded from GAO audits; other areas may be audited at specific Congressional request, and have included bank supervision, government securities activities, and payment system activities.[60][61] The GAO is specifically restricted any authority over monetary policy transactions;[60] the New York Times reported in 1989 that “such transactions are now shielded from outside audit, although the Fed influences interest rates through the purchase of hundreds of billions of dollars in Treasury securities.”[62] As mentioned above, it was in 1999 that the law governing the Federal Reserve was amended to formalize the already-existing annual practice of ordering independent audits of financial statements for the Federal Reserve Banks and the Board;[63] the GAO’s restrictions on auditing monetary policy continued, however.[61]
Congressional oversight on monetary policy operations, foreign transactions, and the FOMC operations is exercised through the requirement for reports and through semi-annual monetary policy hearings.[61] Scholars have conceded that the hearings did not prove an effective means of increasing oversight of the Federal Reserve, perhaps because “Congresspersons prefer to bash an autonomous and secretive Fed for economic misfortune rather than to share the responsibility for that misfortune with a fully accountable Central Bank,” although the Federal Reserve has also consistently lobbied to maintain its independence and freedom of operation.[64]
Fulfillment of wider economic goals
By law, the goals of the Fed’s monetary policy are: high employment, sustainable growth, and stable prices.[65]
Critics say that monetary policy in the United States has not achieved consistent success in meeting the goals that have been delegated to the Federal Reserve System by Congress. Congress began to review more options with regard to macroeconomic influence beginning in 1946 (after World War II), with the Federal Reserve receiving specific mandates in 1977 (after the country suffered a period of stagflation).
Throughout the period of the Federal Reserve following the mandates, the relative weight given to each of these goals has changed, depending on political developments.[citation needed] In particular, the theories of Keynesianism and monetarism have had great influence on both the theory and implementation of monetary policy, and the “prevailing wisdom” or consensus view of the economic and financial communities has changed over the years.[66]
Elastic currency (magnitude of the money multiplier): the success of monetary policy is dependent on the ability to strongly influence the supply of money available to the citizens. If a currency is highly “elastic” (that is, has a higher money multiplier, corresponding to a tendency of the financial system to create more broad money for a given quantity of base money), plans to expand the money supply and accommodate growth are easier to implement. Low elasticity was one of many factors that contributed to the depth of the Great Depression: as banks cut lending, the money multiplier fell, and at the same time the Federal Reserve constricted the monetary base. The depression of the late 1920s is generally regarded as being the worst in the country’s history, and the Federal Reserve has been criticized for monetary policy which worsened the depression.[67] Partly to alleviate problems related to the depression, the United States transitioned from a gold standard and now uses a fiat currency; elasticity is believed to have been increased greatly.[68]
Stable prices – While some economists would regard any consistent inflation as a sign of unstable prices,[71] policymakers could be satisfied with 1 or 2%;[72] the consensus of “price stability” constituting long-run inflation of 1-2% is, however, a relatively recent development, and a change that has occurred at other central banks throughout the world. Inflation has averaged a 4.22% increase annually following the mandates applied in 1977; historic inflation since the establishment of the Federal Reserve in 1913 has averaged 3.4%.[73] In contrast, some research indicates that average inflation for the 250 years before the system was near zero percent, though there were likely sharper upward and downward spikes in that timeframe as compared with more recent times.[74] Central banks in some other countries, notably the German Bundesbank, had considerably better records of achieving price stability drawing on experience from the two episodes of hyperinflation and economic collapse under the country’s previous central bank.
Inflation worldwide has fallen significantly since former Federal Reserve Chairman Paul Volcker began his tenure in 1979, a period which has been called the Great Moderation; some commentators attribute this to improved monetary policy worldwide, particularly in the Organisation for Economic Co-operation and Development.[75][76]BusinessWeek notes that inflation has been relatively low since mid-1980s[77] and it was during this time that Volcker wrote (in 1995), “It is a sobering fact that the prominence of central banks [such as the Federal Reserve] in this century has coincided with a general tendency towards more inflation, not less. By and large, if the overriding objective is price stability, we did better with the nineteenth-century gold standard and passive central banks, with currency boards, or even with ‘free banking.'”.
Sustainable growth – The growth of the economy may not be sustainable as the ability for households to save money has been on an overall decline[78] and household debt is consistently rising.[79]
Monetarists who believe that the Great Depression started as an ordinary recession but significant policy mistakes by monetary authorities (especially the Federal Reserve) caused a shrinking of the money supply which greatly exacerbated the economic situation, causing a recession to descend into the Great Depression.
Public confusion
The Federal Reserve has established a library of information on their websites, however, many experts have spoken about the general level of public confusion that still exists on the subject of the economy; this lack of understanding of macroeconomic questions and monetary policy, however, exists in other countries as well. Critics of the Fed widely regard the system as being “opaque“, and one of the Fed’s most vehement opponents of his time, Congressman Louis T. McFadden, even went so far as to say that “Every effort has been made by the Federal Reserve Board to conceal its powers….”[80]
There are, on the other hand, many economists who support the need for an independent central banking authority, and some have established websites that aim to clear up confusion about the economy and the Federal Reserve’s operations. The Federal Reserve website itself publishes various information and instructional materials for a variety of audiences.
Briefly, the theory holds that an artificial injection of credit, from a source such as a central bank like the Federal Reserve, sends false signals to entrepreneurs to engage in long-term investments due to a favorably low interest rate. However, the surge of investments undertaken represents an artificial boom, or bubble, because the low interest rate was achieved by an artificial expansion of the money supply and not by savings. Hence, the pool of real savings and resources have not increased and do not justify the investments undertaken.
These investments, which are more appropriately called “malinvestments”, are realized to be unsustainable when the artificial credit spigot is shut off and interest rates rise. The malinvestments and unsustainable projects are liquidated, which is the recession. The theory demonstrates that the problem is the artificial boom which causes the malinvestments in the first place, made possible by an artificial injection of credit not from savings.
According to Austrian economics, without government intervention, interest rates will always be an equilibrium between the time-preferences of borrowers and savers, and this equilibrium is simply distorted by government intervention. This distortion, in their view, is the cause of the business cycle. Some Austrian economists—but by no means all—also support full reserve banking, a hypothetical financial/banking system where banks may not lend deposits. Others may advocate free banking, whereby the government abstains from any interference in what individuals may choose to use as money or the extent to which banks create money through the deposit and lending cycle.
Reserve requirement
The Federal Reserve regulates banking, and one regulation under its direct control is the reserve requirement which dictates how much money banks must keep in reserves, as compared to its demand deposits. Banks use their observation that the majority of deposits are not requested by the account holders at the same time.
Currently, the Federal Reserve requires that banks keep 10% of their deposits on hand.[81] Some countries have no nationally mandated reserve requirements—banks use their own resources to determine what to hold in reserve, however their lending is typically constrained by other regulations.[82] Other factors being equal, lower reserve percentages increases the possibility of Bank runs, such as the widespread runs of 1931. Low reserve requirements also allow for larger expansions of the money supply by actions of commercial banks—currently the private banking system has created much of the broad money supply of US dollars through lending activity. Monetary policy reform calling for 100% reserves has been advocated by economists such as: Irving Fisher,[83]Frank Knight,[84] many ecological economists along with economists of the Chicago School and Austrian School. Despite calls for reform, the nearly universal practice of fractional-reserve banking has remained in the United States.
Criticism of private sector involvement
Historically and to the present day, various social and political movements (such as social credit) have criticized the involvement of the private sector in “creating money”, claiming that only the government should have the power to “make money”. Some proponents also support full reserve banking or other non-orthodox approaches to monetary policy. Various terminology may be used, including “debt money”, which may have emotive or political connotations. These are generally considered to be akin to conspiracy theories by mainstream economists and ignored in academic literature on monetary policy.
Story 1: Fed Desperate To Rise Above the Near Zero Fed Funds Rate Target Range — Need Three Months Of 300,000 Plus Per Month Job Creation, Wage Growth and 3% First Quarter 2015 Real Gross Domestic Product Growth Numbers To Jump to .5 – 1.0% Range Fed Funds Rate Target — June 2015 Launch Date Expected — Fly Me To The Moon — Summertime — Launch — Abort On Recession — Videos
Amazing seven year old sings Fly Me To The Moon (Angelina Jordan) on Senkveld “The Late Show”
Forrest Gump JFK “I Gotta Pee” Scene
Fed Decision: The Three Most Important Things Janet Yellen Said
Press Conference with Chair of the FOMC, Janet L. Yellen
Monetary Policy Based on the Taylor Rule
Many economists believe that rules-based monetary policy provides better economic outcomes than a purely discretionary framework delivers. But there is disagreement about the advantages of rules-based policy and even disagreement about which rule works. One possible policy rule would be for the central bank to follow a Taylor Rule, named after our featured speaker, John B. Taylor. What would some of the advantages of a Taylor Rule be versus, for instance, a money growth rule, or a rule which only specifies the inflation target? How could a policy rule be implemented? Should policy rule legislation be considered? Join us as Professor Taylor addresses these important policy questions.
Murray N. Rothbard on Milton Friedman pre1971
On Milton Friedman | by Murray N. Rothbard
Who Was the Better Monetary Economist? Rothbard and Friedman Compared | Joseph T. Salerno
Joseph Salerno “Unmasking the Federal Reserve”
Rothbard on Alan Greenspan
Milton Friedman – Money and Inflation
Milton Friedman – Abolish The Fed
Milton Friedman On John Maynard Keynes
Hayek on Keynes’s Ignorance of Economics
Friedrich Hayek explains to Leo Rosten that while brilliant Keynes had a parochial understanding of economics.
On John Maynard Keynes | by Murray N. Rothbard
Hayek on Milton Friedman and Monetary Policy
Friedrich Hayek: Why Intellectuals Drift Towards Socialism
Capitalism, Socialism, and the Jews
The Normal State of Man: Misery & Tyranny
Peter Schiff Interviews Keynesian Economist Laurence Kotlikoff 01-18-12
Larry Kotlikoff on the Clash of Generations
Extended interview with Boston University Economics Professor Larry Kotlikoff on his publications about a six-decade long Ponzi scheme in the US which he says will lead to a clash of generations.
Kotlikoff also touches on what his projections mean for the New Zealand economy and why Prime Minister John Key should take more attention of New Zealand’s ‘fiscal gap’ – the gap between all future government spending commitments and its future revenue track.
Thomas Sowell on Intellectuals and Society
Angelina Jordan – summertime
Angelina Jordan synger Sinatra i semifinalen i Norske Talenter 2014
Release Date: March 18, 2015
For immediate release
Information received since the Federal Open Market Committee met in January suggests that economic growth has moderated somewhat. Labor market conditions have improved further, with strong job gains and a lower unemployment rate. A range of labor market indicators suggests that underutilization of labor resources continues to diminish. Household spending is rising moderately; declines in energy prices have boosted household purchasing power. Business fixed investment is advancing, while the recovery in the housing sector remains slow and export growth has weakened. Inflation has declined further below the Committee’s longer-run objective, largely reflecting declines in energy prices. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of energy price declines and other factors dissipate. The Committee continues to monitor inflation developments closely.
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. In determining how long to maintain this target range, the Committee will assess progress–both realized and expected–toward 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. 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. This change in the forward guidance does not indicate that the Committee has decided on the timing of the initial increase in the target range.
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.
When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.
Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Jeffrey M. Lacker; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John C. Williams.
Note: Projections of change in real gross domestic product (GDP) and projections for both measures of inflation are percent changes from the fourth quarter of the previous year to the fourth quarter of the year indicated. PCE inflation and core PCE inflation are the percentage rates of change in, respectively, the price index for personal consumption expenditures (PCE) and the price index for PCE excluding food and energy. Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated. Each participant’s projections are based on his or her assessment of appropriate monetary policy. Longer-run projections represent each participant’s assessment of the rate to which each variable would be expected to converge under appropriate monetary policy and in the absence of further shocks to the economy. The December projections were made in conjunction with the meeting of the Federal Open Market Committee on December 16-17, 2014.
1. The central tendency excludes the three highest and three lowest projections for each variable in each year. Return to table
2. The range for a variable in a given year includes all participants’ projections, from lowest to highest, for that variable in that year. Return to table
3. Longer-run projections for core PCE inflation are not collected. Return to table
Figure 1. Central tendencies and ranges of economic projections, 2015-17 and over the longer run
Central tendencies and ranges of economic projections for years 2015 through 2017 and over the longer run. Actual values for years 2010 through 2014.
Change in real GDP Percent
2010
2011
2012
2013
2014
2015
2016
2017
Longer Run
Actual
2.7
1.7
1.6
3.1
2.4
–
–
–
–
Upper End of Range
–
–
–
–
–
3.1
3.0
2.5
2.5
Upper End of Central Tendency
–
–
–
–
–
2.7
2.7
2.4
2.3
Lower End of Central Tendency
–
–
–
–
–
2.3
2.3
2.0
2.0
Lower End of Range
–
–
–
–
–
2.1
2.2
1.8
1.8
Unemployment rate Percent
2010
2011
2012
2013
2014
2015
2016
2017
Longer Run
Actual
9.5
8.7
7.8
7.0
5.7
–
–
–
–
Upper End of Range
–
–
–
–
–
5.3
5.2
5.5
5.8
Upper End of Central Tendency
–
–
–
–
–
5.2
5.1
5.1
5.2
Lower End of Central Tendency
–
–
–
–
–
5.0
4.9
4.8
5.0
Lower End of Range
–
–
–
–
–
4.8
4.5
4.8
4.9
PCE inflation Percent
2010
2011
2012
2013
2014
2015
2016
2017
Longer Run
Actual
1.3
2.7
1.6
1.0
1.1
–
–
–
–
Upper End of Range
–
–
–
–
–
1.5
2.4
2.2
2.0
Upper End of Central Tendency
–
–
–
–
–
0.8
1.9
2.0
2.0
Lower End of Central Tendency
–
–
–
–
–
0.6
1.7
1.9
2.0
Lower End of Range
–
–
–
–
–
0.6
1.6
1.7
2.0
Note: Definitions of variables are in the general note to the projections table. The data for the actual values of the variables are annual.
Figure 2. Overview of FOMC participants’ assessments of appropriate monetary policy
Appropriate timing of policy firming
2015
2016
Number of participants
15
2
Note: In the upper panel, the height of each bar denotes the number of FOMC participants who judge that, under appropriate monetary policy, the first increase in the target range for the federal funds rate from its current range of 0 to 1/4 percent will occur in the specified calendar year. In December 2014, the numbers of FOMC participants who judged that the first increase in the target federal funds rate would occur in 2015, and 2016 were, respectively, 15, and 2.
Appropriate pace of policy firming: Midpoint of target range or target level for the federal funds rate Number of participants with projected midpoint of target range or target level
Midpoint of target range
or target level (Percent)
2015
2016
2017
Longer Run
0.125
2
0.250
0.375
1
1
0.500
0.625
7
0.750
0.875
3
1.000
1.125
1
1
1.250
1.375
2
1.500
1.625
1
6
1.750
1.875
3
2.000
1
2.125
1
2.250
1
2.375
2.500
2.625
1
3
2.750
2.875
2
3.000
1
3.125
4
3.250
3.375
2
1
3.500
7
3.625
2
3.750
1
2
6
3.875
1
4.000
1
2
4.125
4.250
1
Note: In the lower panel, each shaded circle indicates the value (rounded to the nearest 1/8 percentage point) of an individual participant’s judgment of the midpoint of the appropriate target range for the federal funds rate or the appropriate target level for the federal funds rate at the end of the specified calendar year or over the longer run.
Janet Yellen Isn’t Going to Raise Interest Rates Until She’s Good and Ready
The key words in Janet L. Yellen’s news conference Wednesday were rather pithy, at least by central bank standards. “Just because we removed the word ‘patient’ from the statement doesn’t mean we are going to be impatient,” Ms. Yellen, the Federal Reserve chairwoman, said.
With this framing, Ms. Yellen was putting her firm stamp on the policy of an institution she has led for just over a year — and making clear that she will not be boxed in. Her words and accompanying announcements conveyed the message that the Yellen Fed has no intention of taking the support struts of low interest rates away until she is absolutely confident that economic growth will hold up without them.
Photo
Janet Yellen held a news conference after a meeting of the Federal Open Market Committee in Washington on Wednesday.CreditChip Somodevilla/Getty Images
Ms. Yellen’s comments about patience versus impatience were part of that dance. But the dual message was even more powerful when combined with other elements of the central bank’s newly released information, which sent the signal that members of the committee intend to move cautiously on rate increases.
By eliminating the reference to “patience,” Paul Edelstein, an economist at IHS Global Insight, said in a research note, “The Fed did what it was expected to do.”
“But beyond that,” he added, “the committee appeared much more dovish and in not much of a hurry to actually pull the trigger.”
Fed officials’ forecasts of how high rates will be at year’s end for 2015, 2016 and 2017 all fell compared to where they were in December. They marked down their forecast for economic growth and inflation for all three years, implying that the nation’s economic challenge is tougher and inflation risks more distant than they had seemed a few months ago.
Particularly interesting was that Fed officials lowered their estimate of the longer-run unemployment rate, to 5 to 5.2 percent, from 5.2 to 5.5 percent. With joblessness hitting 5.5 percent in February, that implied that policy makers are convinced the job market has more room to tighten before it becomes too tight. Fed leaders now forecast unemployment rates in 2016 and 2017 that are a bit below what many view as the long-term sustainable level, which one would expect to translate into rising wages.
In other words, they want to run the economy a little hot for the next couple of years to help spur the kinds of wage gains that might return inflation to the 2 percent level they aim for, but which they have persistently undershot in recent years.
Apart from the details of the dovish monetary policy signals Ms. Yellen and her colleagues sent, it is clear she wanted to jolt markets out of any feeling that policy is on a preordained path.
At times over the last couple of years, the Fed had seemed to set a policy course and then go on a forced march until it got there, regardless of whether the jobs numbers were good or bad, or whether inflation was rising or falling. That is certainly how it felt when the Fed decided in December 2013 to wind down its quantitative easing policies by $10 billion per meeting, which it did through the first nine months of 2014 with few signs of re-evaluation as conditions evolved.
In her first news conference as chairwoman a year ago, Ms. Yellen had suggested that rate increases might be on a similar preordained path by saying that she could imagine rate increases “around six months” after the conclusion of quantitative easing. (That comment increasingly looks to have been a rookie mistake, and she later backed away from it.)
There are likely to be plenty of twists and turns in the coming months. After this week’s meeting, Ms. Yellen reinforced the message she has been trying to convey that the committee really will adapt its policy to incoming information rather than simply carry on with the path it set a year ago.
If the strengthening dollar and falling oil prices start to translate into still-lower expectations for future inflation, the Fed will hold off from rate rises — and the same if wage gains and other job market indicators show a lack of progress.
Conversely, if the job market recovery keeps going gangbusters and it becomes clear that inflation is going to rise back toward 2 percent, Ms. Yellen does not want to be constrained by language about “patience.”
“This change does not necessarily mean that an increase will occur in June,” Ms. Yellen said, “though we cannot rule that out.”
She has now bought herself some latitude to decide when and how the Fed ushers in an era of tighter money. Now the question is just how patient or impatient American economic conditions will allow her to be.
In economics, a Taylor rule is a monetary-policy rule that stipulates how much the central bank should change the nominal interest rate in response to changes in inflation, output, or other economic conditions. In particular, the rule stipulates that for each one-percent increase in inflation, the central bank should raise the nominal interest rate by more than one percentage point. This aspect of the rule is often called the Taylor principle.
The rule of was first proposed by John B. Taylor,[1] and simultaneously by Dale W. Henderson and Warwick McKibbin in 1993.[2] It is intended to foster price stability and full employment by systematically reducing uncertainty and increasing the credibility of future actions by the central bank. It may also avoid the inefficiencies of time inconsistency from the exercise ofdiscretionary policy.[3][4] The Taylor rule synthesized, and provided a compromise between, competing schools of economics thought in a language devoid of rhetorical passion.[5] Although many issues remain unresolved and views still differ about how the Taylor rule can best be applied in practice, research shows that the rule has advanced the practice of central banking.[6]
As an equation
According to Taylor’s original version of the rule, the nominal interest rate should respond to divergences of actual inflation rates from target inflation rates and of actual Gross Domestic Product (GDP) from potential GDP:
In this equation, both and should be positive (as a rough rule of thumb, Taylor’s 1993 paper proposed setting ).[7] That is, the rule “recommends” a relatively high interest rate (a “tight” monetary policy) when inflation is above its target or when output is above its full-employment level, in order to reduce inflationary pressure. It recommends a relatively low interest rate (“easy” monetary policy) in the opposite situation, to stimulate output. Sometimes monetary policy goals may conflict, as in the case of stagflation, when inflation is above its target while output is below full employment. In such a situation, a Taylor rule specifies the relative weights given to reducing inflation versus increasing output.
The Taylor principle
By specifying , the Taylor rule says that an increase in inflation by one percentage point should prompt the central bank to raise the nominal interest rate by more than one percentage point (specifically, by , the sum of the two coefficients on in the equation above). Since the real interest rate is (approximately) the nominal interest rate minus inflation, stipulating implies that when inflation rises, the real interest rate should be increased. The idea that the real interest rate should be raised to cool the economy when inflation increases (requiring the nominal interest rate to increase more than inflation does) has sometimes been called the Taylor principle.[8]
During an EconTalk podcast Taylor explained the rule in simple terms using three variables: inflation rate, GDP growth, and the interest rate. If inflation were to rise by 1%, the proper response would be to raise the interest rate by 1.5% (Taylor explains that it doesn’t always need to be exactly 1.5%, but being larger than 1% is essential). If GDP falls by 1% relative to its growth path, then the proper response is to cut the interest rate by .5%.[9]
Alternative versions of the rule
While the Taylor principle has proved very influential, there is more debate about the other terms that should enter into the rule. According to some simple New Keynesian macroeconomic models, insofar as the central bank keeps inflation stable, the degree of fluctuation in output will be optimized (Blanchard and Gali call this property the ‘divine coincidence‘). In this case, the central bank need not take fluctuations in the output gap into account when setting interest rates (that is, it may optimally set .) On the other hand, other economists have proposed including additional terms in the Taylor rule to take into account money gap[10] or financial conditions: for example, the interest rate might be raised when stock prices, housing prices, or interest rate spreads increase.
Empirical relevance
Although the Federal Reserve does not explicitly follow the Taylor rule, many analysts have argued that the rule provides a fairly accurate summary of US monetary policy under Paul Volcker and Alan Greenspan.[11][12] Similar observations have been made about central banks in other developed economies, both in countries like Canada and New Zealand that have officially adopted inflation targeting rules, and in others like Germany where the Bundesbank‘s policy did not officially target the inflation rate.[13][14] This observation has been cited by Clarida, Galí, and Gertler as a reason why inflation had remained under control and the economy had been relatively stable (the so-called ‘Great Moderation‘) in most developed countries from the 1980s through the 2000s.[11] However, according to Taylor, the rule was not followed in part of the 2000s, possibly leading to the housing bubble.[15][16] Certain research has determined that some households form their expectations about the future path of interest rates, inflation, and unemployment in a way that is consistent with Taylor-type rules.[17]
Criticisms
Athanasios Orphanides (2003) claims that the Taylor rule can misguide policy makers since they face real-time data. He shows that the Taylor rule matches the US funds rate less perfectly when accounting for these informational limitations and that an activist policy following the Taylor rule would have resulted in an inferior macroeconomic performance during the Great Inflation of the seventies.[18]
Jump up^Henderson, D. W.; McKibbin, W. (1993). “A Comparison of Some Basic Monetary Policy Regimes for Open Economies: Implications of Different Degrees of Instrument Adjustment and Wage Persistence”. Carnegie-Rochester Conference Series on Public Policy39: 221–318. doi:10.1016/0167-2231(93)90011-K.
Jump up^Paul Klein (2009). “time consistency of monetary and fiscal policy,” The New Palgrave Dictionary of Economics. 2nd Edition. Abstract.
Jump up^Kahn, George A.; Asso, Pier Francesco; Leeson, Robert (2007). “The Taylor Rule and the Transformation of Monetary Policy”. Federal Reserve Bank of Kansas City Working Paper 07-11. SSRN1088466.
Jump up^Asso, Pier Francesco; Kahn, George A.; Leeson, Robert (2010). “The Taylor Rule and the Practice of Central Banking”. Federal Reserve Bank of Kansas City Working Paper 10-05. SSRN1553978.
Jump up^Benchimol, Jonathan; Fourçans, André (2012). “Money and risk in a DSGE framework : A Bayesian application to the Eurozone”. Journal of Macroeconomics34 (1): 95–111, Abstract.
Jump up^Taylor, John B. (2009). Getting Off Track: How Government Actions and Interventions Caused, Prolonged, and Worsened the Financial Crisis. Hoover Institution Press. ISBN0-8179-4971-2.
Jump up^Carvalho, Carlos; Nechio, Fernanda (2013). “Do People Understand Monetary Policy?”. Federal Reserve Bank of San Francisco Working Paper 2012-01.SSRN1984321.
Story 1: The Fed’s Long and Winding Road Back To A Normal Monetary Policy Starting in June 2015 With a .75% Increase in The Federal Fund’s Interest Rate Target — Two Years Too Late — Yeah, Yeah, Yeah, Yeah — Imagine, Stand By Me — Videos
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WHAT IT MEANS IF FED NO LONGER SAYS IT’S ‘PATIENT’ ON RATES
BY MARTIN CRUTSINGER
For the Federal Reserve, patience may no longer be a virtue.
Surrounding the Fed’s policy meeting this week is the widespread expectation that it will no longer use the word “patient” to describe its stance on raising interest rates from record lows.
The big question is: What will that mean?
Many economists say the dropping of “patience” would signal that the Fed plans to start raising rates in June to reflect a steadily strengthening U.S. job market. Others foresee no rate hike before September. And a few predict no increase before year’s end at the earliest.
Complicating the decision is a surging U.S. dollar, which is keeping inflation far below the Fed’s target rate and posing a threat to U.S. corporate profits and possibly to the economy. A rate increase could send the dollar even higher.
In a statement it will issue when its meeting ends Wednesday and in a news conference Chair Janet Yellen will hold afterward, the Fed isn’t likely to telegraph its timetable. Yellen has said that any decision to raise rates will reflect the latest economic data and that the Fed must remain flexible.
Still, nervous investors have been selling stocks out of concern that a rate increase – which could slow borrowing and spending and weigh on the economy – is coming soon.
“I think the odds are better than 50-50 that the Fed … will drop the word `patient’ at the March meeting, and that would put an initial rate hike in play, perhaps as early as the June meeting,” said David Jones, author of several books about the Fed.
Historically, the Fed raises rates as the economy strengthens in order to control growth and prevent inflation from overheating. Over the past 12 months, U.S. employers have added a solid 200,000-plus jobs every month. And unemployment has reached a seven-year low of 5.5 percent, the top of the range the Fed has said is consistent with a healthy economy.
The trouble is that the Fed isn’t meeting its other major policy goal – achieving stable inflation, which it defines as annual price increases of around 2 percent. According to the Fed’s preferred inflation gauge, prices rose just 0.2 percent over the past 12 months. In part, excessively low U.S. inflation reflects sinking energy prices and the dollar’s rising value, which lowers the prices of goods imported to the United States.
It isn’t just inflation that remains below optimal levels. Though the job market has been strong, the overall economy has yet to regain full health. The economy slowed to a tepid 2.2 percent annual rate in the October-December quarter, and economists generally think the current quarter might be even weaker. Manufacturers are struggling with falling exports, partly because of the strong dollar, and consumers – the drivers of the economy – have seemed reluctant to spend their windfall savings from cheaper energy.
What’s more, pay for many workers remains stagnant, and there are 6.6 million part-timers who can’t find full-time jobs – nearly 50 percent more than in 2007, before the recession began.
For those reasons, some analysts think it would be premature to raise rates soon.
“The last thing the Fed wants to do right now is spook the markets and the economy into an even slower growth trajectory,” said Brian Bethune, an economics professor at Tufts University.
After it met in December, the Fed said for the first time that it would be “patient’ about raising rates. Yellen said that meant there would be no increase at the Fed’s next two meetings. And in testimony to Congress last month, she cautioned that even when “patient” is dropped, it won’t necessarily signal an imminent rate hike – only that the Fed will think the economy has improved enough for it to consider a rate increase on a “meeting-by-meeting basis.”
Some economists say the Fed may tweak its policy statement this week to signal that a higher inflation outlook would be needed before any rate hike. And they expect the Fed to go further in coming months to ready investors for the inevitable.
“The process is going to be glacial,” said Diane Swonk, chief economist at Mesirow Financial in Chicago. “They want to prepare the markets for change, but they don’t want to scare them.”
Though Swonk thinks the Fed will drop “patient” from its statement this week, she doesn’t expect a rate hike before September. Even then, she foresees only small increases in its benchmark rate.
Sung Won Sohn, an economics professor at the Martin Smith School of Business at California State University, suggested that the Fed’s strategy in beginning to raise rates won’t be to slow the economy. Rather, he thinks the goal will be to manage the expectations of investors, some of whom weren’t even in business in 2004, the last time the Fed began raising rates.
“The Fed is just trying to send a message that the world is about to enter a new age after a long period of low interest rates to a period of rising rates,” Sohn said.
The End of “Patient” and Questions for Yellen, by Tim Duy: FOMC meeting with week, with a subsequent press conference with Fed Chair Janet Yellen. Remember to clear your calendar for this Wednesday. It is widely expected that the Fed will drop the word “patient” from its statement. Too many FOMC participants want the opportunity to debate a rate hike in June, and thus “patient” needs to go. The Fed will not want this to imply that a rate hike is guaranteed at the June meeting, so look for language emphasizing the data-dependent nature of future policy. This will also be stressed in the press conference. Of interest too will be the Fed’s assessment of economic conditions since the last FOMC meeting. On net, the data has been lackluster – expect for the employment data, of course. The latter, however, is of the highest importance to the Fed. I anticipate that they will view the rest of the data as largely noise against the steadily improving pace of underlying activity as indicated by employment data. That said, I would expect some mention of recent softness in the opening paragraph of the statement. I don’t think the Fed will alter its general conviction that low readings on inflation are largely temporary. They may even cite improvement in market-based measures of inflation compensation to suggest they were right not to panic at the last FOMC meeting. I am also watching for how they describe the international environment. I would not expect explicit mention of the dollar, but maybe we will see a coded reference. Note that in her recent testimony, Yellen said:
But core PCE inflation has also slowed since last summer, in part reflecting declines in the prices of many imported items and perhaps also some pass-through of lower energy costs into core consumer prices.
Stronger dollar means lower prices of imported items. The press conference will be the highlight of the meeting. Presumably, Yellen will continue to build the case for a rate hike. Since the foundation of that case rests on the improvement in labor markets and the subsequent impact on inflationary pressures, it is reasonable to ask:
On a scale of zero to ten, with ten being most confident, how confident is the Committee that inflation will rise toward target on the basis on low – and expected lower – unemployment?
Considering that low wage growth suggests it is too early to abandon Yellen’s previous conviction that unemployment is not the best measure of labor market tightness, we should consider:
Is faster wage growth a precondition to raising interest rates?
I expect the answer would be “no, wages are a lagging indicator.” The Federal Reserve seems to believe that policy will still remain very accommodative even after the first rate hike. We should ask for a metric to quantify the level of accommodation:
What is the current equilibrium level of interest rates? Where do you see the equilibrium level of interest rates in one year?
A related question regards the interpretation of the yield curve:
Do you consider low interest long-term interest rates to be indicative of loose monetary conditions, or a signal that the Federal Reserve needs to temper its expectations of the likely path of interest rates as indicated in the “dot plot”?
The dollar is appreciating at the fastest rate in many years. Is the appreciating dollar a drag on the US economy, or is any negative impact offset by the positive demand impact of looser monetary policy abroad? How much will the dollar need to appreciate before it impacts the direction of monetary policy?
Given that the Fed seems determined to raise interest rates, we should probably be considering some form of the following as a standard question:
Consider the next six months. Which is greater – the risk of moving too quickly to normalize policy, or the risk of delay? Please explain, with specific reference to both risks.
Finally, a couple of communications questions. First, the Fed is signaling that they do not intend to raise rates on a preset, clearly communicated path like the last hike cycle. Hence, we should not expect “patient” to be replaced with “measured.” But it seems like the FOMC is too contentious to expect them to shift from no hike one meeting to 25bp the next, then back to none – or maybe 50bp. So, let’s ask Yellen to explain the plan:
There appears to be an effort on the part of the FOMC to convince financial markets that rate hikes, when they begin, will not be on a pre-set path. Given the need for consensus building on the FOMC, how can you credibly commit to renegotiate the direction of monetary policy at each FOMC meeting? How do you communicate the likely direction of monetary policy between meetings?
Finally, as we move closer to policy normalization, the Fed should be rethinking the “dot plot,” which was initially conceived to show the Fed was committed to a sustained period of low rates. Given that the dot-plot appears to be fairly hawkish relative to market expectations, it may not be an appropriate signal in a period of rising interest rates. Time for a change? But is the Fed considering a change, and when will we see it? This leads me to:
Cleveland Federal Reserve President Loretta Mester has suggested revising the Summary of Economic Projections to explicitly link the forecasts of individual participants with their “dots” in the interest rate projections. Do you agree that this would be helpful in describing participants’ reaction functions? When will this or any other revisions to the Summary of Economic Projections be considered?
Bottom Line: By dropping “patient” the Fed will be taking another step toward the first rate hike of this cycle. But how long do we need to wait until that first hike? That depends on the data, and we will be listening for signals as to how, or how not, the Fed is being impacted by recent data aside from the positive readings on the labor market. http://economistsview.typepad.com/economistsview/fed_watch/
Patient’ is History: The February employment report almost certainly means the Fed will no longer describe its policy intentions as “patient” at the conclusion of the March FOMC meeting. And it also keep a June rate hike in play. But for June to move from “in play” to “it’s going to happen,” I still feel the Fed needs a more on the inflation side. The key is the height of that inflation bar. The headline NFP gain was a better-than-expected 295k with 18k upward adjustment for January. The 12-month moving average continues to trend higher:
Unemployment fell to 5.5%, which is the top of the central range for the Fed’s estimate of NAIRU. Still, wage growth remains elusive:
Is wage growth sufficient to stay the Fed’s hand? I am not so sure. Irecently wrote:
My take is this: To get a reasonably sized consensus to support a rate hike, two conditions need to be met. One is sufficient progress toward full-employment with the expectation of further progress. I think that condition has already been met. The second condition is confidence that inflation will indeed trend toward target. That condition has not been met. To meet that condition requires at least one of the following sub-conditions: Rising core-inflation, rising market-based measures of inflation compensation, or accelerating wage growth. If any were to occur before June, I suspect it would be the accelerating wage growth.
I am less confident that we will see accelerating wage growth by June, although I should keep in mind we still have three more employment reports before that meeting. Note, however, low wage growth does not preclude a rate hike. The Fed hiked rates in 1994 in a weak wage growth environment:
And again in 2004 liftoff occurred on the (correct) forecast of accelerating wage growth:
So wage growth might not be there in June to support a rate hike. And, as I noted earlier this weaker, I have my doubts on whether core-inflation would support a rate hike either. That leaves us with market-based measures of inflation compensation. And at this point, that just might be the key:
If bond markets continue to reverse the oil-driven inflation compensation decline, the Fed may see a way clear to hiking rates in June. But the pace and timing of subsequent rate hikes would still be data dependent. I would anticipate a fairly slow, halting path of rate hikes in the absence of faster wage growth. Bottom Line: “Patient” is out. Tough to justify with unemployment at the top of the Fed’s central estimates of NAIRU. Pressure to begin hiking rates will intensify as unemployment heads lower. The inflation bar will fall, and Fed officials will increasingly look for reasons to hike rates rather than reasons to delay. They may not want to admit it, but I suspect one of those reasons will be fear of financial instability in the absence of tighter policy. June is in play.
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Employment Situation Report – November 2014
Labor Force Statistics from the Current Population Survey
Employment Level
147,287,000
Series Id: LNS12000000
Seasonally Adjusted
Series title: (Seas) Employment Level
Labor force status: Employed
Type of data: Number in thousands
Age: 16 years and over
Year
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Annual
2000
136559(1)
136598
136701
137270
136630
136940
136531
136662
136893
137088
137322
137614
2001
137778
137612
137783
137299
137092
136873
137071
136241
136846
136392
136238
136047
2002
135701
136438
136177
136126
136539
136415
136413
136705
137302
137008
136521
136426
2003
137417(1)
137482
137434
137633
137544
137790
137474
137549
137609
137984
138424
138411
2004
138472(1)
138542
138453
138680
138852
139174
139556
139573
139487
139732
140231
140125
2005
140245(1)
140385
140654
141254
141609
141714
142026
142434
142401
142548
142499
142752
2006
143150(1)
143457
143741
143761
144089
144353
144202
144625
144815
145314
145534
145970
2007
146028(1)
146057
146320
145586
145903
146063
145905
145682
146244
145946
146595
146273
2008
146378(1)
146156
146086
146132
145908
145737
145532
145203
145076
144802
144100
143369
2009
142152(1)
141640
140707
140656
140248
140009
139901
139492
138818
138432
138659
138013
2010
138451(1)
138599
138752
139309
139247
139148
139179
139427
139393
139111
139030
139266
2011
139287(1)
139422
139655
139622
139653
139409
139524
139904
140154
140335
140747
140836
2012
141677(1)
141943
142079
141963
142257
142432
142272
142204
142947
143369
143233
143212
2013
143384(1)
143464
143393
143676
143919
144075
144285
144179
144270
143485
144443
144586
2014
145224(1)
145266
145742
145669
145814
146221
146352
146368
146600
147283
147287
1 : Data affected by changes in population controls.
Civilian Labor Force Level
156,397,000
Series Id: LNS11000000
Seasonally Adjusted Series title: (Seas) Civilian Labor Force Level Labor force status: Civilian labor force Type of data: Number in thousands Age: 16 years and over
Year
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Annual
2000
142267(1)
142456
142434
142751
142388
142591
142278
142514
142518
142622
142962
143248
2001
143800
143701
143924
143569
143318
143357
143654
143284
143989
144086
144240
144305
2002
143883
144653
144481
144725
144938
144808
144803
145009
145552
145314
145041
145066
2003
145937(1)
146100
146022
146474
146500
147056
146485
146445
146530
146716
147000
146729
2004
146842(1)
146709
146944
146850
147065
147460
147692
147564
147415
147793
148162
148059
2005
148029(1)
148364
148391
148926
149261
149238
149432
149779
149954
150001
150065
150030
2006
150214(1)
150641
150813
150881
151069
151354
151377
151716
151662
152041
152406
152732
2007
153144(1)
152983
153051
152435
152670
153041
153054
152749
153414
153183
153835
153918
2008
154063(1)
153653
153908
153769
154303
154313
154469
154641
154570
154876
154639
154655
2009
154210(1)
154538
154133
154509
154747
154716
154502
154307
153827
153784
153878
153111
2010
153404(1)
153720
153964
154642
154106
153631
153706
154087
153971
153631
154127
153639
2011
153198(1)
153280
153403
153566
153526
153379
153309
153724
154059
153940
154072
153927
2012
154328(1)
154826
154811
154565
154946
155134
154970
154669
155018
155507
155279
155485
2013
155699(1)
155511
155099
155359
155609
155822
155693
155435
155473
154625
155284
154937
2014
155460(1)
155724
156227
155421
155613
155694
156023
155959
155862
156278
156397
1 : Data affected by changes in population controls.
Labor Force Participation Rate
62.8%
Series Id: LNS11300000
Seasonally Adjusted
Series title: (Seas) Labor Force Participation Rate
Labor force status: Civilian labor force participation rate
Type of data: Percent or rate
Age: 16 years and over
Year
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Annual
2000
67.3
67.3
67.3
67.3
67.1
67.1
66.9
66.9
66.9
66.8
66.9
67.0
2001
67.2
67.1
67.2
66.9
66.7
66.7
66.8
66.5
66.8
66.7
66.7
66.7
2002
66.5
66.8
66.6
66.7
66.7
66.6
66.5
66.6
66.7
66.6
66.4
66.3
2003
66.4
66.4
66.3
66.4
66.4
66.5
66.2
66.1
66.1
66.1
66.1
65.9
2004
66.1
66.0
66.0
65.9
66.0
66.1
66.1
66.0
65.8
65.9
66.0
65.9
2005
65.8
65.9
65.9
66.1
66.1
66.1
66.1
66.2
66.1
66.1
66.0
66.0
2006
66.0
66.1
66.2
66.1
66.1
66.2
66.1
66.2
66.1
66.2
66.3
66.4
2007
66.4
66.3
66.2
65.9
66.0
66.0
66.0
65.8
66.0
65.8
66.0
66.0
2008
66.2
66.0
66.1
65.9
66.1
66.1
66.1
66.1
66.0
66.0
65.9
65.8
2009
65.7
65.8
65.6
65.7
65.7
65.7
65.5
65.4
65.1
65.0
65.0
64.6
2010
64.8
64.9
64.9
65.2
64.9
64.6
64.6
64.7
64.6
64.4
64.6
64.3
2011
64.2
64.2
64.2
64.2
64.2
64.0
64.0
64.1
64.2
64.1
64.1
64.0
2012
63.7
63.9
63.8
63.7
63.8
63.8
63.7
63.5
63.6
63.7
63.6
63.6
2013
63.6
63.5
63.3
63.4
63.4
63.5
63.4
63.2
63.2
62.8
63.0
62.8
2014
63.0
63.0
63.2
62.8
62.8
62.8
62.9
62.8
62.7
62.8
62.8
Unemployment Level
9,110,000
Series Id: LNS13000000
Seasonally Adjusted
Series title: (Seas) Unemployment Level
Labor force status: Unemployed
Type of data: Number in thousands
Age: 16 years and over
Year
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Annual
2000
5708
5858
5733
5481
5758
5651
5747
5853
5625
5534
5639
5634
2001
6023
6089
6141
6271
6226
6484
6583
7042
7142
7694
8003
8258
2002
8182
8215
8304
8599
8399
8393
8390
8304
8251
8307
8520
8640
2003
8520
8618
8588
8842
8957
9266
9011
8896
8921
8732
8576
8317
2004
8370
8167
8491
8170
8212
8286
8136
7990
7927
8061
7932
7934
2005
7784
7980
7737
7672
7651
7524
7406
7345
7553
7453
7566
7279
2006
7064
7184
7072
7120
6980
7001
7175
7091
6847
6727
6872
6762
2007
7116
6927
6731
6850
6766
6979
7149
7067
7170
7237
7240
7645
2008
7685
7497
7822
7637
8395
8575
8937
9438
9494
10074
10538
11286
2009
12058
12898
13426
13853
14499
14707
14601
14814
15009
15352
15219
15098
2010
14953
15121
15212
15333
14858
14483
14527
14660
14578
14520
15097
14373
2011
13910
13858
13748
13944
13873
13971
13785
13820
13905
13604
13326
13090
2012
12650
12883
12732
12603
12689
12702
12698
12464
12070
12138
12045
12273
2013
12315
12047
11706
11683
11690
11747
11408
11256
11203
11140
10841
10351
2014
10236
10459
10486
9753
9799
9474
9671
9591
9262
8995
9110
Unemployment Rate U-3
5.8%
Series Id: LNS14000000
Seasonally Adjusted
Series title: (Seas) Unemployment Rate
Labor force status: Unemployment rate
Type of data: Percent or rate
Age: 16 years and over
Year
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Annual
2000
4.0
4.1
4.0
3.8
4.0
4.0
4.0
4.1
3.9
3.9
3.9
3.9
2001
4.2
4.2
4.3
4.4
4.3
4.5
4.6
4.9
5.0
5.3
5.5
5.7
2002
5.7
5.7
5.7
5.9
5.8
5.8
5.8
5.7
5.7
5.7
5.9
6.0
2003
5.8
5.9
5.9
6.0
6.1
6.3
6.2
6.1
6.1
6.0
5.8
5.7
2004
5.7
5.6
5.8
5.6
5.6
5.6
5.5
5.4
5.4
5.5
5.4
5.4
2005
5.3
5.4
5.2
5.2
5.1
5.0
5.0
4.9
5.0
5.0
5.0
4.9
2006
4.7
4.8
4.7
4.7
4.6
4.6
4.7
4.7
4.5
4.4
4.5
4.4
2007
4.6
4.5
4.4
4.5
4.4
4.6
4.7
4.6
4.7
4.7
4.7
5.0
2008
5.0
4.9
5.1
5.0
5.4
5.6
5.8
6.1
6.1
6.5
6.8
7.3
2009
7.8
8.3
8.7
9.0
9.4
9.5
9.5
9.6
9.8
10.0
9.9
9.9
2010
9.7
9.8
9.9
9.9
9.6
9.4
9.5
9.5
9.5
9.5
9.8
9.4
2011
9.1
9.0
9.0
9.1
9.0
9.1
9.0
9.0
9.0
8.8
8.6
8.5
2012
8.2
8.3
8.2
8.2
8.2
8.2
8.2
8.1
7.8
7.8
7.8
7.9
2013
7.9
7.7
7.5
7.5
7.5
7.5
7.3
7.2
7.2
7.2
7.0
6.7
2014
6.6
6.7
6.7
6.3
6.3
6.1
6.2
6.1
5.9
5.8
5.8
Employment -Population Ratio
5.9%
Series Id: LNS12300000
Seasonally Adjusted Series title: (Seas) Employment-Population Ratio Labor force status: Employment-population ratio Type of data: Percent or rate Age: 16 years and over
Year
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Annual
2000
64.6
64.6
64.6
64.7
64.4
64.5
64.2
64.2
64.2
64.2
64.3
64.4
2001
64.4
64.3
64.3
64.0
63.8
63.7
63.7
63.2
63.5
63.2
63.0
62.9
2002
62.7
63.0
62.8
62.7
62.9
62.7
62.7
62.7
63.0
62.7
62.5
62.4
2003
62.5
62.5
62.4
62.4
62.3
62.3
62.1
62.1
62.0
62.1
62.3
62.2
2004
62.3
62.3
62.2
62.3
62.3
62.4
62.5
62.4
62.3
62.3
62.5
62.4
2005
62.4
62.4
62.4
62.7
62.8
62.7
62.8
62.9
62.8
62.8
62.7
62.8
2006
62.9
63.0
63.1
63.0
63.1
63.1
63.0
63.1
63.1
63.3
63.3
63.4
2007
63.3
63.3
63.3
63.0
63.0
63.0
62.9
62.7
62.9
62.7
62.9
62.7
2008
62.9
62.8
62.7
62.7
62.5
62.4
62.2
62.0
61.9
61.7
61.4
61.0
2009
60.6
60.3
59.9
59.8
59.6
59.4
59.3
59.1
58.7
58.5
58.6
58.3
2010
58.5
58.5
58.5
58.7
58.6
58.5
58.5
58.6
58.5
58.3
58.2
58.3
2011
58.4
58.4
58.4
58.4
58.4
58.2
58.2
58.3
58.4
58.4
58.5
58.5
2012
58.5
58.5
58.6
58.5
58.6
58.6
58.5
58.4
58.6
58.8
58.7
58.6
2013
58.6
58.6
58.5
58.6
58.7
58.7
58.7
58.6
58.6
58.2
58.6
58.6
2014
58.8
58.8
58.9
58.9
58.9
59.0
59.0
59.0
59.0
59.2
59.2
Unemployment Rate 16-19 Years Old
17.7%
Series Id: LNS14000012
Seasonally Adjusted Series title: (Seas) Unemployment Rate – 16-19 yrs. Labor force status: Unemployment rate Type of data: Percent or rate Age: 16 to 19 years
Year
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Annual
2000
12.7
13.8
13.3
12.6
12.8
12.3
13.4
14.0
13.0
12.8
13.0
13.2
2001
13.8
13.7
13.8
13.9
13.4
14.2
14.4
15.6
15.2
16.0
15.9
17.0
2002
16.5
16.0
16.6
16.7
16.6
16.7
16.8
17.0
16.3
15.1
17.1
16.9
2003
17.2
17.2
17.8
17.7
17.9
19.0
18.2
16.6
17.6
17.2
15.7
16.2
2004
17.0
16.5
16.8
16.6
17.1
17.0
17.8
16.7
16.6
17.4
16.4
17.6
2005
16.2
17.5
17.1
17.8
17.8
16.3
16.1
16.1
15.5
16.1
17.0
14.9
2006
15.1
15.3
16.1
14.6
14.0
15.8
15.9
16.0
16.3
15.2
14.8
14.6
2007
14.8
14.9
14.9
15.9
15.9
16.3
15.3
15.9
15.9
15.4
16.2
16.8
2008
17.8
16.6
16.1
15.9
19.0
19.2
20.7
18.6
19.1
20.0
20.3
20.5
2009
20.7
22.3
22.2
22.2
23.4
24.7
24.3
25.0
25.9
27.2
26.9
26.7
2010
26.0
25.6
26.2
25.4
26.5
26.0
25.9
25.6
25.8
27.3
24.8
25.3
2011
25.5
24.1
24.3
24.5
23.9
24.8
24.8
25.1
24.5
24.2
24.1
23.3
2012
23.5
23.8
24.8
24.6
24.2
23.7
23.7
24.4
23.8
23.8
23.9
24.0
2013
23.5
25.2
23.9
23.7
24.1
23.8
23.4
22.6
21.3
22.0
20.8
20.2
2014
20.7
21.4
20.9
19.1
19.2
21.0
20.2
19.6
20.0
18.6
17.7
Average Weeks Unemployed
33.0%
Series Id: LNS13008275
Seasonally Adjusted
Series title: (Seas) Average Weeks Unemployed
Labor force status: Unemployed
Type of data: Number of weeks
Age: 16 years and over
Year
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Annual
2000
13.1
12.6
12.7
12.4
12.6
12.3
13.4
12.9
12.2
12.7
12.4
12.5
2001
12.7
12.8
12.8
12.4
12.1
12.7
12.9
13.3
13.2
13.3
14.3
14.5
2002
14.7
15.0
15.4
16.3
16.8
16.9
16.9
16.5
17.6
17.8
17.6
18.5
2003
18.5
18.5
18.1
19.4
19.0
19.9
19.7
19.2
19.5
19.3
19.9
19.8
2004
19.9
20.1
19.8
19.6
19.8
20.5
18.8
18.8
19.4
19.5
19.7
19.4
2005
19.5
19.1
19.5
19.6
18.6
17.9
17.6
18.4
17.9
17.9
17.5
17.5
2006
16.9
17.8
17.1
16.7
17.1
16.6
17.1
17.1
17.1
16.3
16.2
16.1
2007
16.3
16.7
17.8
16.9
16.6
16.5
17.2
17.0
16.3
17.0
17.3
16.6
2008
17.5
16.9
16.5
16.9
16.6
17.1
17.0
17.7
18.6
19.9
18.9
19.9
2009
19.8
20.2
20.9
21.7
22.4
23.9
25.1
25.3
26.6
27.5
28.9
29.7
2010
30.3
29.9
31.6
33.3
33.9
34.5
33.8
33.6
33.4
34.2
33.9
34.8
2011
37.2
37.5
39.2
38.7
39.5
39.7
40.4
40.2
40.2
39.1
40.3
40.7
2012
40.1
40.0
39.4
39.3
39.6
40.0
38.8
39.1
39.4
40.3
39.2
38.0
2013
35.4
36.9
37.0
36.6
36.9
35.7
36.7
37.0
36.8
36.0
37.1
37.1
2014
35.4
37.1
35.6
35.1
34.5
33.5
32.4
31.7
31.5
32.7
33.0
Not In Labor Force
2,109,000
Series Id: LNU05026642
Not Seasonally Adjusted
Series title: (Unadj) Not in Labor Force, Searched For Work and Available
Labor force status: Not in labor force
Type of data: Number in thousands
Age: 16 years and over
Job desires/not in labor force: Want a job now
Reasons not in labor force: Available to work now
Year
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Annual
2000
1207
1281
1219
1216
1113
1142
1172
1097
1166
1044
1100
1125
1157
2001
1295
1337
1109
1131
1157
1170
1232
1364
1335
1398
1331
1330
1266
2002
1532
1423
1358
1397
1467
1380
1507
1456
1501
1416
1401
1432
1439
2003
1598
1590
1577
1399
1428
1468
1566
1665
1544
1586
1473
1483
1531
2004
1670
1691
1643
1526
1533
1492
1557
1587
1561
1647
1517
1463
1574
2005
1804
1673
1588
1511
1428
1583
1516
1583
1438
1414
1415
1589
1545
2006
1644
1471
1468
1310
1388
1584
1522
1592
1299
1478
1366
1252
1448
2007
1577
1451
1385
1391
1406
1454
1376
1365
1268
1364
1363
1344
1395
2008
1729
1585
1352
1414
1416
1558
1573
1640
1604
1637
1947
1908
1614
2009
2130
2051
2106
2089
2210
2176
2282
2270
2219
2373
2323
2486
2226
2010
2539
2527
2255
2432
2223
2591
2622
2370
2548
2602
2531
2609
2487
2011
2800
2730
2434
2466
2206
2680
2785
2575
2511
2555
2591
2540
2573
2012
2809
2608
2352
2363
2423
2483
2529
2561
2517
2433
2505
2614
2516
2013
2443
2588
2326
2347
2164
2582
2414
2342
2302
2283
2096
2427
2360
2014
2592
2303
2168
2160
2130
2028
2178
2141
2226
2192
2109
Not In Labor Force Searched For Work and Available, Discouraged Reasons For Not Currently Looking
698,000
Series Id: LNU05026645
Not Seasonally Adjusted
Series title: (Unadj) Not in Labor Force, Searched For Work and Available, Discouraged Reasons For Not Currently Looking
Labor force status: Not in labor force
Type of data: Number in thousands
Age: 16 years and over
Job desires/not in labor force: Want a job now
Reasons not in labor force: Discouragement over job prospects (Persons who believe no job is available.)
Year
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Annual
2000
236
267
258
331
280
309
266
203
253
232
236
269
262
2001
301
287
349
349
328
294
310
337
285
331
328
348
321
2002
328
375
330
320
414
342
405
378
392
359
385
403
369
2003
449
450
474
437
482
478
470
503
388
462
457
433
457
2004
432
484
514
492
476
478
504
534
412
429
392
442
466
2005
515
485
480
393
392
476
499
384
362
392
404
451
436
2006
396
386
451
381
323
481
428
448
325
331
349
274
381
2007
442
375
381
399
368
401
367
392
276
320
349
363
369
2008
467
396
401
412
400
420
461
381
467
484
608
642
462
2009
734
731
685
740
792
793
796
758
706
808
861
929
778
2010
1065
1204
994
1197
1083
1207
1185
1110
1209
1219
1282
1318
1173
2011
993
1020
921
989
822
982
1119
977
1037
967
1096
945
989
2012
1059
1006
865
968
830
821
852
844
802
813
979
1068
909
2013
804
885
803
835
780
1027
988
866
852
815
762
917
861
2014
837
755
698
783
697
676
741
775
698
770
698
Total Unemployment Rate U-6
11.4%
Series Id: LNS13327709
Seasonally Adjusted
Series title: (seas) Total unemployed, plus all marginally attached workers plus total employed part time for economic reasons, as a percent of all civilian labor force plus all marginally attached workers
Labor force status: Aggregated totals unemployed
Type of data: Percent or rate
Age: 16 years and over
Percent/rates: Unemployed and mrg attached and pt for econ reas as percent of labor force plus marg attached
Year
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Annual
2000
7.1
7.2
7.1
6.9
7.1
7.0
7.0
7.1
7.0
6.8
7.1
6.9
2001
7.3
7.4
7.3
7.4
7.5
7.9
7.8
8.1
8.7
9.3
9.4
9.6
2002
9.5
9.5
9.4
9.7
9.5
9.5
9.6
9.6
9.6
9.6
9.7
9.8
2003
10.0
10.2
10.0
10.2
10.1
10.3
10.3
10.1
10.4
10.2
10.0
9.8
2004
9.9
9.7
10.0
9.6
9.6
9.5
9.5
9.4
9.4
9.7
9.4
9.2
2005
9.3
9.3
9.1
8.9
8.9
9.0
8.8
8.9
9.0
8.7
8.7
8.6
2006
8.4
8.4
8.2
8.1
8.2
8.4
8.5
8.4
8.0
8.2
8.1
7.9
2007
8.4
8.2
8.0
8.2
8.2
8.3
8.4
8.4
8.4
8.4
8.4
8.8
2008
9.2
9.0
9.1
9.2
9.7
10.1
10.5
10.8
11.0
11.8
12.6
13.6
2009
14.2
15.2
15.8
15.9
16.5
16.5
16.4
16.7
16.7
17.1
17.1
17.1
2010
16.7
17.0
17.1
17.2
16.6
16.4
16.4
16.5
16.8
16.6
16.9
16.6
2011
16.1
16.0
15.9
16.1
15.8
16.1
16.0
16.1
16.3
15.9
15.6
15.2
2012
15.1
15.0
14.5
14.6
14.8
14.8
14.9
14.7
14.7
14.4
14.4
14.4
2013
14.4
14.3
13.8
13.9
13.8
14.2
13.9
13.6
13.6
13.7
13.1
13.1
2014
12.7
12.6
12.7
12.3
12.2
12.1
12.2
12.0
11.8
11.5
11.4
Employment Situation Summary
Transmission of material in this release is embargoed until USDL-14-2184
8:30 a.m. (EST) Friday, December 5, 2014
Technical information:
Household data: (202) 691-6378 • cpsinfo@bls.gov • www.bls.gov/cps
Establishment data: (202) 691-6555 • cesinfo@bls.gov • www.bls.gov/ces
Media contact: (202) 691-5902 • PressOffice@bls.gov
THE EMPLOYMENT SITUATION -- NOVEMBER 2014
Total nonfarm payroll employment increased by 321,000 in November, and the unemployment
rate was unchanged at 5.8 percent, the U.S. Bureau of Labor Statistics reported today.
Job gains were widespread, led by growth in professional and business services, retail
trade, health care, and manufacturing.
Household Survey Data
In November, the unemployment rate held at 5.8 percent, and the number of unemployed
persons was little changed at 9.1 million. Over the year, the unemployment rate and
the number of unemployed persons were down by 1.2 percentage points and 1.7 million,
respectively. (See table A-1.)
Among the major worker groups, the unemployment rate for adult men rose to 5.4 percent
in November. The rates for adult women (5.3 percent), teenagers (17.7 percent), whites
(4.9 percent), blacks (11.1 percent), and Hispanics (6.6 percent) showed little change
over the month. The jobless rate for Asians was 4.8 percent (not seasonally adjusted),
little changed from a year earlier. (See tables A-1, A-2, and A-3.)
The number of long-term unemployed (those jobless for 27 weeks or more) was little
changed at 2.8 million in November. These individuals accounted for 30.7 percent of
the unemployed. Over the past 12 months, the number of long-term unemployed declined
by 1.2 million. (See table A-12.)
The civilian labor force participation rate held at 62.8 percent in November and has
been essentially unchanged since April. The employment-population ratio, at 59.2
percent, was unchanged in November but is up by 0.6 percentage point over the year.
(See table A-1.)
The number of persons employed part time for economic reasons (sometimes referred to
as involuntary part-time workers), at 6.9 million, changed little in November. These
individuals, who would have preferred full-time employment, were working part time
because their hours had been cut back or because they were unable to find a full-time
job. (See table A-8.)
In November, 2.1 million persons were marginally attached to the labor force,
essentially unchanged from a year earlier. (The data are not seasonally adjusted.)
These individuals were not in the labor force, wanted and were available for work,
and had looked for a job sometime in the prior 12 months. They were not counted as
unemployed because they had not searched for work in the 4 weeks preceding the
survey. (See table A-16.)
Among the marginally attached, there were 698,000 discouraged workers in November,
little different from a year earlier. (The data are not seasonally adjusted.)
Discouraged workers are persons not currently looking for work because they believe
no jobs are available for them. The remaining 1.4 million persons marginally attached
to the labor force in November had not searched for work for reasons such as school
attendance or family responsibilities. (See table A-16.)
Establishment Survey Data
Total nonfarm payroll employment rose by 321,000 in November, compared with an
average monthly gain of 224,000 over the prior 12 months. In November, job growth
was widespread, led by gains in professional and business services, retail trade,
health care, and manufacturing. (See table B-1.)
Employment in professional and business services increased by 86,000 in November,
compared with an average gain of 57,000 per month over the prior 12 months. Within
the industry, accounting and bookkeeping services added 16,000 jobs in November.
Employment continued to trend up in temporary help services (+23,000), management
and technical consulting services (+7,000), computer systems design and related
services (+7,000), and architectural and engineering services (+5,000).
Employment in retail trade rose by 50,000 in November, compared with an average
gain of 22,000 per month over the prior 12 months. In November, job gains occurred
in motor vehicle and parts dealers (+11,000); clothing and accessories stores
(+11,000); sporting goods, hobby, book, and music stores (+9,000); and nonstore
retailers (+6,000).
Health care added 29,000 jobs over the month. Employment continued to trend up in
offices of physicians (+7,000), home health care services (+5,000), outpatient care
centers (+4,000), and hospitals (+4,000). Over the past 12 months, employment in
health care has increased by 261,000.
In November, manufacturing added 28,000 jobs. Durable goods manufacturers accounted
for 17,000 of the increase, with small gains in most of the component industries.
Employment in nondurable goods increased by 11,000, with plastics and rubber products
(+7,000) accounting for most of the gain. Over the year, manufacturing has added
171,000 jobs, largely in durable goods.
Financial activities added 20,000 jobs in November, with half of the gain in insurance
carriers and related activities. Over the past year, insurance has contributed 70,000
jobs to the overall employment gain of 114,000 in financial activities.
Transportation and warehousing employment increased by 17,000 in November, with a
gain in couriers and messengers (+5,000). Over the past 12 months, transportation
and warehousing has added 143,000 jobs.
Employment in food services and drinking places continued to trend up in November
(+27,000) and has increased by 321,000 over the year.
Construction employment also continued to trend up in November (+20,000). Employment in
specialty trade contractors rose by 21,000, mostly in the residential component. Over
the past 12 months, construction has added 213,000 jobs, with just over half the gain
among specialty trade contractors.
In November, the average workweek for all employees on private nonfarm payrolls rose
by 0.1 hour to 34.6 hours. The manufacturing workweek rose by 0.2 hour to 41.1 hours,
and factory overtime edged up by 0.1 hour to 3.5 hours. The average workweek for
production and nonsupervisory employees on private nonfarm payrolls was unchanged at
33.8 hours. (See tables B-2 and B-7.)
Average hourly earnings for all employees on private nonfarm payrolls rose by 9 cents
to $24.66 in November. Over the year, average hourly earnings have risen by 2.1 percent.
In November, average hourly earnings of private-sector production and nonsupervisory
employees increased by 4 cents to $20.74. (See tables B-3 and B-8.)
The change in total nonfarm payroll employment for September was revised from +256,000
to +271,000, and the change for October was revised from +214,000 to +243,000. With
these revisions, employment gains in September and October combined were 44,000 more
than previously reported.
_____________
The Employment Situation for December is scheduled to be released on Friday,
January 9, 2015, at 8:30 a.m. (EST).
__________________________________________________________________________________
| |
| Upcoming Changes to the Employment Situation News Release |
| |
|Effective with the release of January 2015 data on February 6, 2015, the U.S. |
|Bureau of Labor Statistics will introduce several changes to The Employment |
|Situation news release tables. |
| |
|Household survey table A-2 will introduce seasonally adjusted series on the labor |
|force characteristics of Asians. These series will appear in addition to the not |
|seasonally adjusted data for Asians currently displayed in the table. Also, in |
|summary table A, the seasonally adjusted unemployment rate for Asians will replace|
|the not seasonally adjusted series that is currently displayed for the group. |
| |
|Household survey table A-3 will introduce seasonally adjusted series on the labor |
|force characteristics of Hispanic men age 20 and over, Hispanic women age 20 and |
|over, and Hispanic teenagers age 16 to 19. The not seasonally adjusted series for |
|these groups will continue to be displayed in the table. |
| |
|The establishment survey will introduce two data series: (1) total nonfarm |
|employment, 3-month average change and (2) total private employment, 3-month |
|average change. These new series will be added to establishment survey summary |
|table B. Additionally, in the employment section of summary table B, the list |
|of industries will be expanded to include utilities (currently published in |
|table B-1). Also, hours and earnings of production and nonsupervisory employees |
|will be removed from summary table B, although these series will continue to be |
|published in establishment survey tables B-7 and B-8. A sample of the new summary |
|table B is available on the BLS website at www.bls.gov/ces/cesnewsumb.pdf. |
|__________________________________________________________________________________|
__________________________________________________________________________________
| |
| Revision of Seasonally Adjusted Household Survey Data |
| |
|In accordance with usual practice, The Employment Situation news release for |
|December 2014, scheduled for January 9, 2015, will incorporate annual revisions in|
|seasonally adjusted household survey data. Seasonally adjusted data for the most |
|recent 5 years are subject to revision. |
|__________________________________________________________________________________|
Job losers and persons who completed temporary jobs
5,7314,5304,3584,483125
Job leavers
89082979483844
Reentrants
3,0652,8092,8712,773-98
New entrants
1,1691,1051,0631,0641
Duration of unemployment
Less than 5 weeks
2,4392,3832,4732,52956
5 to 14 weeks
2,5852,5082,3122,39078
15 to 26 weeks
1,7421,4161,4171,43114
27 weeks and over
4,0442,9542,9162,815-101
Employed persons at work part time
Part time for economic reasons
7,7237,1037,0276,850-177
Slack work or business conditions
4,8694,1624,2144,064-150
Could only find part-time work
2,4992,5622,4472,4536
Part time for noneconomic reasons
18,85819,56119,76920,004235
Persons not in the labor force (not seasonally adjusted)
Marginally attached to the labor force
2,0962,2262,1922,109–
Discouraged workers
762698770698–
– Over-the-month changes are not displayed for not seasonally adjusted data.
NOTE: Persons whose ethnicity is identified as Hispanic or Latino may be of any race. Detail for the seasonally adjusted data shown in this table will not necessarily add to totals because of the independent seasonal adjustment of the various series. Updated population controls are introduced annually with the release of January data.
Employment Situation Summary Table B. Establishment data, seasonally adjusted
ESTABLISHMENT DATA
Summary table B. Establishment data, seasonally adjusted
Footnotes (1) Includes other industries, not shown separately. (2) Data relate to production employees in mining and logging and manufacturing, construction employees in construction, and nonsupervisory employees in the service-providing industries. (3) The indexes of aggregate weekly hours are calculated by dividing the current month’s estimates of aggregate hours by the corresponding annual average aggregate hours. (4) The indexes of aggregate weekly payrolls are calculated by dividing the current month’s estimates of aggregate weekly payrolls by the corresponding annual average aggregate weekly payrolls. (5) Figures are the percent of industries with employment increasing plus one-half of the industries with unchanged employment, where 50 percent indicates an equal balance between industries with increasing and decreasing employment. (p) Preliminary
EMBARGOED UNTIL RELEASE AT 8:30 A.M. EST, TUESDAY, NOVEMBER 25, 2014
BEA 14-59
* See the navigation bar at the right side of the news release text for links to data tables,
contact personnel and their telephone numbers, and supplementary materials.
National Income and Product Accounts
Gross Domestic Product: Third Quarter 2014 (Second Estimate)
Corporate Profits: Third Quarter 2014 (Preliminary Estimate)
Real gross domestic product -- the value of the production of goods and services in the United
States, adjusted for price changes -- increased at an annual rate of 3.9 percent in the third quarter of
2014, according to the "second" estimate released by the Bureau of Economic Analysis. In the second
quarter, real GDP increased 4.6 percent.
The GDP estimate released today is based on more complete source data than were available for
the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 3.5
percent. With the second estimate for the third quarter, private inventory investment decreased less than
previously estimated, and both personal consumption expenditures (PCE) and nonresidential fixed
investment increased more. In contrast, exports increased less than previously estimated (see
"Revisions" on page 3).
The increase in real GDP in the third quarter reflected positive contributions from PCE,
nonresidential fixed investment, federal government spending, exports, residential fixed investment, and
state and local government spending that were partly offset by a negative contribution from private
inventory investment. Imports, which are a subtraction in the calculation of GDP, decreased.
The deceleration in the percent change in real GDP reflected a downturn in private inventory
investment and decelerations in exports, in nonresidential fixed investment, in state and local
government spending, in PCE, and in residential fixed investment that were partly offset by a downturn
in imports and an upturn in federal government spending.
The price index for gross domestic purchases, which measures prices paid by U.S. residents,
increased 1.4 percent in the third quarter, 0.1 percentage point more than in the advance estimate; this
index increased 2.0 percent in the second quarter. Excluding food and energy prices, the price index for
gross domestic purchases increased 1.6 percent in the third quarter, compared with an increase of 1.7
percent in the second.
_____
FOOTNOTE. Quarterly estimates are expressed at seasonally adjusted annual rates, unless otherwise
specified. Quarter-to-quarter dollar changes are differences between these published estimates. Percent
changes are calculated from unrounded data and are annualized. "Real" estimates are in chained (2009)
dollars. Price indexes are chain-type measures.
This news release is available on BEA's Web site along with the Technical Note and Highlights related
to this release. For information on revisions, see "The Revisions to GDP, GDI, and Their
Major Components."
_____
Real personal consumption expenditures increased 2.2 percent in the third quarter, compared
with an increase of 2.5 percent in the second. Durable goods increased 8.7 percent, compared with an
increase of 14.1 percent. Nondurable goods increased 2.2 percent, the same increase as in the second
quarter. Services increased 1.2 percent, compared with an increase of 0.9 percent.
Real nonresidential fixed investment increased 7.1 percent in the third quarter, compared with an
increase of 9.7 percent in the second. Investment in nonresidential structures increased 1.1 percent,
compared with an increase of 12.6 percent. Investment in equipment increased 10.7 percent, compared
with an increase of 11.2 percent. Investment in intellectual property products increased 6.4 percent,
compared with an increase of 5.5 percent. Real residential fixed investment increased 2.7 percent,
compared with an increase of 8.8 percent.
Real exports of goods and services increased 4.9 percent in the third quarter, compared with an
increase of 11.1 percent in the second. Real imports of goods and services decreased 0.7 percent, in
contrast to an increase of 11.3 percent.
Real federal government consumption expenditures and gross investment increased 9.9 percent
in the third quarter, in contrast to a decrease of 0.9 percent in the second. National defense increased
16.0 percent, compared with an increase of 0.9 percent. Nondefense increased 0.4 percent, in contrast to
a decrease of 3.8 percent. Real state and local government consumption expenditures and gross
investment increased 0.8 percent, compared with an increase of 3.4 percent.
The change in real private inventories subtracted 0.12 percentage point from the third-quarter
change in real GDP after adding 1.42 percentage points to the second-quarter change. Private
businesses increased inventories $79.1 billion in the third quarter, following increases of $84.8 billion in
the second quarter and $35.2 billion in the first.
Real final sales of domestic product -- GDP less change in private inventories -- increased 4.1
percent in the third quarter, compared with an increase of 3.2 percent in the second.
Gross domestic purchases
Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever
produced -- increased 3.0 percent in the third quarter, compared with an increase of 4.8 percent in the
second.
Gross national product
Real gross national product -- the value of the goods and services produced by the labor and
property supplied by U.S. residents -- increased 3.8 percent in the third quarter, compared with an
increase of 4.6 percent in the second. GNP includes, and GDP excludes, net receipts of income from the
rest of the world, which decreased $1.6 billion in the third quarter, in contrast to an increase of $1.4
billion in the second; in the third quarter, receipts decreased $1.1 billion, and payments increased $0.5
billion.
Current-dollar GDP
Current-dollar GDP -- the market value of the production of goods and services in the United
States -- increased 5.3 percent, or $227.0 billion, in the third quarter to a level of $17,555.2 billion. In
the second quarter, current-dollar GDP increased 6.8 percent, or $284.2 billion.
Gross domestic income
Real gross domestic income (GDI), which measures the value of the production of goods and
services in the United States as the costs incurred and the incomes earned on that production, increased
4.5 percent in the third quarter, compared with an increase of 4.0 percent (revised) in the second. For a
given quarter, the estimates of GDP and GDI may differ for a variety of reasons, including the
incorporation of largely independent source data. However, over longer time spans, the estimates of
GDP and GDI tend to follow similar patterns of change.
Revisions
The upward revision to the percent change in real GDP primarily reflected upward revisions to
private inventory investment, to personal consumption expenditures, and to nonresidential fixed
investment that were partly offset by a downward revision to exports and an upward revision to imports.
Advance Estimate Second Estimate
(Percent change from preceding quarter)
Real GDP............................... 3.5 3.9
Current-dollar GDP..................... 4.9 5.3
Real GDI............................... -- 4.5
Gross domestic purchases price index... 1.3 1.4
Corporate Profits
Profits from current production
Profits from current production (corporate profits with inventory valuation adjustment (IVA) and
capital consumption adjustment (CCAdj)) increased $43.8 billion in the third quarter, compared with an
increase of $164.1 billion in the second.
Profits of domestic financial corporations increased $20.3 billion in the third quarter, compared
with an increase of $33.3 billion in the second. Profits of domestic nonfinancial corporations increased
$22.5 billion, compared with an increase of $134.3 billion. The rest-of-the-world component of profits
increased $1.0 billion, in contrast to a decrease of $3.6 billion. This measure is calculated as the
difference between receipts from the rest of the world and payments to the rest of the world. In the third
quarter, receipts were unchanged, and payments decreased $1.0 billion.
Taxes on corporate income decreased $4.8 billion in the third quarter, in contrast to an increase
of $45.7 billion in the second. Profits after tax with IVA and CCAdj increased $48.6 billion, compared
with an increase of $118.4 billion.
Dividends decreased $3.9 billion in the third quarter, compared with a decrease of $0.5 billion in
the second. Undistributed profits increased $52.5 billion, compared with an increase of $118.8 billion.
Net cash flow with IVA -- the internal funds available to corporations for investment -- increased $25.1
billion, compared with an increase of $133.4 billion.
The IVA and CCAdj are adjustments that convert inventory withdrawals and depreciation of
fixed assets reported on a tax-return, historical-cost basis to the current-cost economic measures used in
the national income and product accounts. The IVA increased $16.8 billion in the third quarter,
compared with an increase of $11.9 billion in the second. The CCAdj increased $1.2 billion, in contrast
to a decrease of $0.8 billion.
Gross value added of nonfinancial domestic corporate business
In the third quarter, real gross value added of nonfinancial corporations increased, and profits per
unit of real gross value added increased. The increase in unit profits reflected an increase in unit prices
that was partly offset by an increase in unit nonlabor costs; unit labor costs were unchanged.
* * *
BEA's national, international, regional, and industry estimates; the Survey of Current Business;
and BEA news releases are available without charge on BEA's Web site at www.bea.gov. By visiting
the site, you can also subscribe to receive free e-mail summaries of BEA releases and announcements.
* * *
Next release -- December 23, 2014 at 8:30 A.M. EST for:
Gross Domestic Product: Third Quarter 2014 (Third Estimate)
Corporate Profits: Third Quarter 2014 (Revised Estimate)
* * *
Release dates in 2015
Gross Domestic Product
2014: IV and 2014 annual 2015: I 2015: II 2015: III
Advance.... January 30 April 29 July 30 October 29
Second..... February 27 May 29 August 27 November 24
Third...... March 27 June 24 September 25 December 22
Corporate Profits
Preliminary... .. May 29 August 27 November 24
Revised....... March 27 June 24 September 25 December 22
Story 1: Obama Recklessly Endangers The Health of The American People By Allowing West Africans From Ebola Infected Countries To Fly Into United States — Open Borders To Illegal Aliens Fleeing Ebola Pandemic — Obama Panics And Appoints New Ebola Czar — Another Political Elitist Establishment (PEE) Washington Insider With No Executive Leadership or Medical Experience — Videos
CDC warns against travel ban on Ebola-affected countries
Bill Johnson Discusses the Congressional Ebola Hearing with Fox News’ Gretchen Carlson
Ebola outbreak: Nebraska Medical Center ready at moment’s notice
Activation- A Nebraska Medical Center Biocontainment Unit Story
NEIDL: Biosafety Level 4
A Mission of Safety
NEIDL
In the Hot Zone with Virus X – Richard Preston
Elbows-Deep in Ebola Virus – Richard Preston
CNN Reporter To WH: What Does Obama’s Ebola Czar Know About Ebola?
Dr Nicole Lurie on National Health Security and Resiliency
Nicole Lurie, HHS: Flu Pandemic Lessons for Future Biothreats
How to Prioritize Flu Vaccine in Future (Panel discussion)
How Influenza Pandemics Occur
Hospitals “Full-Up”: The 1918 Influenza Pandemic
Dr. Nicole Lurie – HHS Assistant Secretary for Preparedness & Response
Ebola Czar hides away in bunker — Dr. Nicole Lurie
Weekly Examiner: Obama appoints Ebola czar
Obama Appoints Ebola ‘czar’ As Anxiety Mounts
Source: Obama to name Ron Klain as Ebola czar
President Obama appoints Ron Klain as Ebola “czar”
Remarks of Ron Klain
Actor Kevin Spacey, Georgetown’s Ron Klain Discuss Politics and Ethics
Obama’s New Ebola ‘Czar’ Has NO Health or Medical Background!
Biosafety level
Krauthammer: Obama Is a Narcissist ‘Surrounded by Sycophants’
President Obama Speaks on Ebola
Fast Facts on US Hospitals
The American Hospital Association conducts an annual survey of hospitals in the United States. The data below, from the 2012 AHA Annual Survey, are a sample of what you will find in AHA Hospital Statistics, 2014 edition. The definitive source for aggregate hospital data and trend analysis, AHA Hospital Statistics includes current and historical data on utilization, personnel, revenue, expenses, managed care contracts, community health indicators, physician models, and much more.
AHA Hospital Statistics is published annually by Health Forum, an affiliate of the American Hospital Association. Additional details on AHA Hospital Statistics and other Health Forum data products are available at www.ahadataviewer.com. To order AHA Hospital Statistics, call (800) AHA-2626 or click on www.ahaonlinestore.com.
For further information or customized data and research, contact the AHA Resource Center at (312) 422-2050 or rc@aha.org.
*Registered hospitals are those hospitals that meet AHA’s criteria for registration as a hospital facility. Registered hospitals include AHA member hospitals as well as nonmember hospitals. For a complete listing of the criteria used for registration, please see Registration Requirements for Hospitals.
**Community hospitals are defined as all nonfederal, short-term general, and other special hospitals. Other special hospitals include obstetrics and gynecology; eye, ear, nose, and throat; rehabilitation; orthopedic; and other individually described specialty services. Community hospitals include academic medical centers or other teaching hospitals if they are nonfederal short-term hospitals. Excluded are hospitals not accessible by the general public, such as prison hospitals or college infirmaries.
***System is defined by AHA as either a multihospital or a diversified single hospital system. A multihospital system is two or more hospitals owned, leased, sponsored, or contract managed by a central organization. Single, freestanding hospitals may be categorized as a system by bringing into membership three or more, and at least 25 percent, of their owned or leased non-hospital preacute or postacute health care organizations. System affiliation does not preclude network participation.
**** Network is a group of hospitals, physicians, other providers, insurers and/or community agencies that work together to coordinate and deliver a broad spectrum of services to their community. Network participation does not preclude system affiliation.
Ebola has officially made it to the US, but there is absolutely no reason to freak out. That’s in large part thanks to Emory University Hospital’s state-of-the-art isolation ward, which is better-equipped to field Ebola cases than any ordinary hospital in the country. Here’s a look at the tech that keeps doctors and nurses safe.
Emory is one of four high-level biocontainment patient care units in the US; the others are located at the National Institutes of Health in Maryland, Rocky Mountain Laboratories in Montana, and the University of Nebraska Medical Center. We spoke with Dr. Angela Hewlett, associate medical director at the Nebraska Biocontainment Patient Care Unit — the largest of the four facilities — about biocontainment suits, wearing three pairs of gloves, and custom air pressure systems.
Perhaps the most comfort Hewlett was able to provide is that none of the super-fancy tech that these four high-level isolation wards have at their disposal is even necessary for Ebola. “There’s a big fear factor with this illness but really, these types of patients can taken care of at any good healthcare facility,” says Dr. Hewlett.
That’s because the Ebola virus easily dies outside of the human body, so unless you’ve been handling a sick person’s blood or feces, you are almost certainly A-OK. Ebola is pretty darn hard to get compared to an airborne disease like SARS or even the regular old flu. But with a mortality rate of up to 90 per cent — and over 50 per cent with the strain in the current outbreak — we still need to keep doctors and nurses as safe as we can. Here’s how Nebraska Biocontainment Unit keeps diseases like Ebola — and much, much worse — from spreading in the hospital.
Negative air pressure. As with Emory in Atlanta, the isolation unit in Nebraska is isolated from the rest of the general hospital. It runs on its own air circulation system, and the air is passed through a high-efficiency particulate air (HEPA) filter before it is vented outside of the building. That’s the same kind of precautions that you would see in a biosafety level 4 lab (the highest) that works with deadly or highly contagious diseases.
In addition, the biocontainment unit has negative air pressure, which means that air pressure inside the isolation rooms is slightly lower than that outside. Essentially, air is gently sucked into the room, so particles from inside the room can’t float out when you open a door. As another line of protection, ultraviolet lights zap any viruses or bacteria in the air or on surfaces.
Full-body suits and THREE pairs of gloves. The Biocontainment Unit is equipped with gear that covers you head to toe, in some places three times over. That includes personal respirators, headgear, full-body suits and gloves. Healthcare workers wear three pairs, including one thick pair that protects against needle accidents, and then two pairs of ordinary gloves so they have an extra pair to work with patients.
Entering and exiting the room becomes an elaborate production because putting on and taking off all the gear can take more than 10 minutes each way. A second person assists to make sure every piece of equipment is put on right and there are no rips or tears in any of the protective gear. Afterwards, every piece of equipment is wiped down to kill the pathogen; in the case of Ebola, simple bleach is enough to do the trick. The full-body suit is discarded after each use.
Training and training and training. Having fancy technology is great but not if you don’t know how to use it properly. “They have to go through really extensive training,” says Hewlett of the the 30-person team that works in the unit. They get 80 hours of training before they can begin, followed by monthly meetings and quarterly drills, where the photos in this post were taken.
It’s worth reiterating that most of this equipment and these procedures go above and beyond protecting for Ebola. The air systems and full-body suits are really there to guard against possible airborne diseases, like smallpox or SARS or some highly contagious avian flu viruses that may emerge in the future.
In fact, the CDC’s current guidelines for treating Ebola in U.S. hospitals require only gloves, goggles, a facemask, and a gown in most situations. Even if someone inadvertently brings Ebola to other hospitals, it’s highly unlikely to spread in the U.S. The situation is different in Africa, where inadequate equipment and fear of healthcare workers has contributed to the worsening situation.
A State Department official did visit Nebraska to see whether the unit would be ready to accept any Ebola patients in the future, though the facility hasn’t yet been used despite being open for nine years. There hasn’t been a disease serious enough to merit it. “This is good thing,” says Dr. Hewlett, “However with world travel the way it is, it is inevitable these things are going to come eventually.” If and when Ebola does come to the U.S. again, we are definitely prepared, which is not something we can say about what else may be coming down the line.
Pictures: University of Nebraska Medical Center
Obama names Ron Klain as Ebola ‘czar’
David Jackson
President Obama tapped veteran government insider Ron Klain to coordinate his administration’s efforts to contain the Ebola virus Friday.
Klain, a former chief of staff to Vice Presidents Joe Biden and Al Gore, is well-known by Obama and White House aides. He was selected for his management experience and contacts throughout the government, White House spokesman Josh Earnest said.
“He is the right person for the job,” Earnest said, particularly the challenge of “integrating the interagency response.”
Klain’s appointment marks a swift turnabout for Obama, who until Thursday had resisted calls to appoint a single official to run the government’s response to Ebola.
Asked Thursday about the prospect of an “Ebola czar,” Obama said, “It may make sense for us to have one person, in part just so that after this initial surge of activity, we can have a more regular process just to make sure that we’re crossing all the t’s and dotting all the i’s going forward.”
USA TODAY
From recounts to stimulus to Ebola: Ron Klain’s resume
Obama did not mention Klain’s appointment during a speech Friday to the Consumer Financial Protection Bureau, but he said his administration is taking an “all-hands-on-deck” approach to fighting Ebola.
The administration has come under increased pressure to name an anti-Ebola coordinator in the wake of news that two nurses in Dallas contracted the deadly virus. Both had treated a man who died of Ebola.
Klain played a high-profile file in Gore’s 2000 presidential campaign. Oscar-winning actor Kevin Spacey portrayed him in an HBO movie on that year’s Florida recount.
The Ebola response includes efforts to screen travelers from West African nations where Ebola has reached epidemic proportions and killed more than 4,500 people. Klain will help coordinate the assistance the U.S. military provides in West Africa.
Some Republican lawmakers criticized Obama for entrusting the job to a former government manager rather than a professional.
Rep. Andy Harris, R-Md., tweeted, “Worst ebola epidemic in world history and Pres. Obama puts a government bureaucrat with no healthcare experience in charge. Is he serious?”
Members of the public health community expressed surprise.
“When are they going to stop making mistakes?” said Robert Murphy, the director of the Center for Global Health at Northwestern University’s Feinberg School of Medicine. “We need a czar, but optimally a strong public health expert. I am so disappointed. This is not what we need.”
Physician Amesh Adalja, a spokesman for the Infectious Diseases Society of America, said, “It’s clear that there’s a desperate desire for an organized approach to dealing with this outbreak. I don’t necessarily think we need a disease-specific czar — we have one for HIV — but more of an emerging infectious diseases/biosecurity coordinator who reports to the president.”
The Ebola position is designed to be more managerial in nature, involving an array of government agencies ranging from the Pentagon to Health and Human Services.
“This is much broader than a medical response,” Earnest said.
As for Republican criticism, Earnest joked, “That’s a shocking development.” He noted that national elections are less than three weeks away.
Klain may weigh in on another question facing the administration: the prospect of a U.S. travel ban from West African nations where there have been Ebola outbreaks.
Obama and aides have disputed the need for a travel ban, questioning whether it would work and arguing that it might create unintended problems.
Thursday, Obama said experts in infectious diseases have told him “a travel ban is less effective than the measures that we are currently instituting that involve screening passengers who are coming from West Africa.”
Klain is likely to take a low key role publicly.
Earnest said Obama wasn’t looking for an Ebola expert but “an implementation expert.”
He confirmed Klain’s title: “Ebola response coordinator.”
Klain will report to two officials involved in the anti-Ebola effort: homeland security adviser Lisa Monaco and national security adviser Susan Rice.
Obama is pleased with the work of Monaco and Rice, but “given their management of other national and homeland security priorities, additional bandwidth will further enhance the government’s Ebola response,” a White House official said, speaking on condition of anonymity.
The president has long known Klain, who helped prepare him for debates with Mitt Romney during the 2012 presidential campaign.
Klain has been out of government since leaving Biden’s staff during Obama’s first term.
The administration’s Ebola evasions reveal its disdain for the American people.
The administration’s handling of the Ebola crisis continues to be marked by double talk, runaround and gobbledygook. And its logic is worse than its language. In many of its actions, especially its public pronouncements, the government is functioning not as a soother of public anxiety but the cause of it.
An example this week came in the dialogue between Megyn Kelly of Fox News andThomas Frieden, director of the Centers for Disease Control.
Their conversation focused largely on the government’s refusal to stop travel into the United States by citizens of plague nations. “Why not put a travel ban in place,” Ms. Kelly asked, while we shore up the U.S. public-health system?
Dr. Frieden replied that we now have screening at airports, and “we’ve already recommended that all nonessential travel to these countries be stopped for Americans.” He added: “We’re always looking at ways that we can better protect Americans.”
“But this is one,” Ms. Kelly responded.
Dr. Frieden implied a travel ban would be harmful: “If we do things that are going to make it harder to stop the epidemic there, it’s going to spread to other parts of—”
Ms. Kelly interjected, asking how keeping citizens from the affected regions out of America would make it harder to stop Ebola in Africa.
“Because you can’t get people in and out.”
“Why can’t we have charter flights?”
“You know, charter flights don’t do the same thing commercial airliners do.”
“What do you mean? They fly in and fly out.”
Dr. Frieden replied that limiting travel between African nations would slow relief efforts. “If we isolate these countries, what’s not going to happen is disease staying there. It’s going to spread more all over Africa and we’ll be at higher risk.”
Later in the interview, Ms. Kelly noted that we still have airplanes coming into the U.S. from Liberia, with passengers expected to self-report Ebola exposure.
Dr. Frieden responded: “Ultimately the only way—and you may not like this—but the only way we will get our risk to zero here is to stop the outbreak in Africa.”
Ms. Kelly said yes, that’s why we’re sending troops. But why can’t we do that and have a travel ban?
“If it spreads more in Africa, it’s going to be more of a risk to us here. Our only goal is protecting Americans—that’s our mission. We do that by protecting people here and by stopping threats abroad. That protects Americans.”
Dr. Frieden’s logic was a bit of a heart-stopper. In fact his responses were more non sequiturs than answers. We cannot ban people at high risk of Ebola from entering the U.S. because people in West Africa have Ebola, and we don’t want it to spread. Huh?
In testimony before Congress Thursday, Dr. Frieden was not much more straightforward. His answers often sound like filibusters: long, rolling paragraphs of benign assertion, advertising slogans—“We know how to stop Ebola,” “Our focus is protecting people”—occasionally extraneous data, and testimony to the excellence of our health-care professionals.
It is my impression that everyone who speaks for the government on this issue has been instructed to imagine his audience as anxious children. It feels like how the pediatrician talks to the child, not the parents. It’s as if they’ve been told: “Talk, talk, talk, but don’t say anything. Clarity is the enemy.”
The language of government now is word-spew.
Dr. Frieden did not explain his or the government’s thinking on the reasons for opposition to a travel ban. On the other hand, he noted that the government will consider all options in stopping the virus from spreading here, so perhaps that marks the beginning of a possible concession.
It is one thing that Dr. Frieden, and those who are presumably making the big decisions, have been so far incapable of making a believable and compelling case for not instituting a ban. A separate issue is how poor a decision it is. To call it childish would be unfair to children. In fact, if you had a group of 11-year-olds, they would surely have a superior answer to the question: “Sick people are coming through the door of the house, and we are not sure how to make them well. Meanwhile they are starting to make us sick, too. What is the first thing to do?”
The children would reply: “Close the door.” One would add: “Just for a while, while you figure out how to treat everyone getting sick.” Another might say: “And keep going outside the door in protective clothing with medical help.” Eleven-year-olds would get this one right without a lot of struggle.
If we don’t momentarily close the door to citizens of the affected nations, it is certain that more cases will come into the U.S. It is hard to see how that helps anyone. Closing the door would be no guarantee of safety—nothing is guaranteed, and the world is porous. But it would reduce risk and likelihood, which itself is worthwhile.
Africa, by the way, seems to understand this. The Associated Press on Thursday reported the continent’s health-care officials had limited the threat to only five countries with the help of border controls, travel restrictions, and aggressive and sophisticated tracking.
All of which returns me to my thoughts the past few weeks. Back then I’d hear the official wordage that doesn’t amount to a logical thought, and the unspoken air of “We don’t want to panic you savages,” and I’d look at various public officials and muse: “Who do you think you are?”
Now I think, “Who do they think we are?”
Does the government think if America is made to feel safer, she will forget the needs of the Ebola nations? But Americans, more than anyone else, are the volunteers, altruists and in a few cases saints who go to the Ebola nations to help. And they were doing it long before the Western media was talking about the disease, and long before America was experiencing it.
At the Ebola hearings Thursday, Rep. Henry Waxman (D., Calif.) said, I guess to the American people: “Don’t panic.” No one’s panicking—except perhaps the administration, which might explain its decisions.
Is it always the most frightened people who run around telling others to calm down?
This week the president canceled a fundraiser and returned to the White House to deal with the crisis. He made a statement and came across as about three days behind the story—“rapid response teams” and so forth. It reminded some people of the statement in July, during another crisis, of the president’s communications director, who said that when a president rushes back to Washington, it “can have the unintended consequence of unduly alarming the American people.” Yes, we’re such sissies. Actually, when Mr. Obama eschews a fundraiser to go to his office to deal with a public problem we are not scared, only surprised.
But again, who do they think we are? You gather they see us as poor, panic-stricken people who want a travel ban because we’re beside ourselves with fear and loathing. Instead of practical, realistic people who are way ahead of our government.
Klain’s early experience on Capitol Hill included serving as Legislative Director for U.S. RepresentativeEd Markey. From 1989 to 1992, he served as Chief Counsel to the U.S. Senate Committee on the Judiciary, overseeing the legal staff’s work on matters of constitutional law, criminal law, antitrust law, and Supreme Court nominations. In 1995, Senator Tom Daschle appointed him the Staff Director of the Senate Democratic Leadership Committee.
Clinton administration
Klain joined the Clinton-Gore campaign in 1992. He ultimately was involved in both of Bill Clinton‘s campaigns, oversaw Clinton’s judicial nominations, and was General Counsel to Al Gore’s recount committee in the 2000 election aftermath. Some published reports have given him credit for Clinton’s “100,000 cops” proposal during the 1992 campaign; at a minimum, he worked closely with Clinton aide Bruce Reed in formulating it. In the White House, he was Associate Counsel to the President, directing judicial selection efforts, and led the team that won confirmation of Supreme Court Associate Justice Ruth Bader Ginsburg. Klain left the judicial selection role in 1994 to become Chief of Staff and Counselor to Attorney General Janet Reno. In 1995, he became Assistant to the President, and Chief of Staff and Counselor to Al Gore.
Gore campaign
During Klain’s tenure as Gore’s Chief of Staff, Gore consolidated his position as the likely Democratic nominee in 2000. Still, Klain was seen as too loyal to Clinton by some longtime Gore advisors. Feuding broke out between Clinton and Gore loyalists in the White House in 1999, and Klain was ousted by Gore campaign chairmanTony Coelho in August of that year. In October 1999, he joined the Washington, D.C. office of the law firm of O’Melveny & Myers. A year later, Klain returned to the Gore campaign, once Coelho was replaced by William M. Daley. Daley hired Klain for a senior position in the Gore campaign and then named him General Counsel of Gore’s Recount Committee.
Legal career
In 1994, Time named Klain one of the “50 most promising leaders in America” under the age of 40. In 1999, Washingtonian magazine named him the top lawyer in Washington under the age of 40, and the American Bar Association’s Barrister magazine named him one of the top 20 young lawyers nationwide. The National Law Journal named him one of its Lawyers of the Year for 2000.
Lobbying
Klain helped Fannie Mae overcome “regulatory issues”.[8]Lobbying on “regulatory issues concerning Fannie Mae” in 2004, as disclosure forms indicate Klain did, involved convincing Congress and Fannie Mae’s regulators that Fannie Mae wasn’t doing anything dangerous, and wasn’t exposing taxpayers to risk. In other words, Ron Klain got paid to help fuel the housing bubble up until a couple of years before it popped.
2004-2008
During the 2004 Presidential campaign, Klain worked as an adviser to Wesley Clark in the early primaries. Later, during the General Election, Klain was heavily involved behind the scenes in John Kerry‘s campaign and is widely credited for his role in preparing Senator Kerry for a strong performance in the debates against President George W. Bush, which gave Kerry a significant boost in the polls.[9] He then acted as an informal adviser to Evan Bayh, who is from Klain’s home state of Indiana. Klain has also commented on matters of law and policy on televised programs such as the Today Show, Good Morning America, Nightline, Capital Report,NewsHour with Jim Lehrer, and Crossfire.
In 2005, Klain left his partnership at O’Melveny & Myers to serve as Executive Vice President and General Counsel of a new investment firm, Revolution LLC, launched by AOL co-founder Steve Case.[citation needed]
Klain was mentioned as a possible replacement for White House Chief of Staff Rahm Emanuel,[12] but opted to leave the White House for a position in the private sector in January 2011.[2]
Klain apparently signed off on President Obama’s support of a $535 million loan guarantee for now-defunct solar-panel company Solyndra. Despite concerns about whether the company was viable, Klain approved an Obama visit, stating, “The reality is that if POTUS visited 10 such places over the next 10 months, probably a few will be belly-up by election day 2012.”[13]
Dr. Lurie is the Assistant Secretary for Preparedness and Response (ASPR) at the US Department of Health and Human Services (HHS).
The mission of her office is to lead the nation in preventing, responding to and recovering from the adverse health effects of public health emergencies and disasters, ranging from hurricanes to bioterrorism.
Dr. Lurie was previously Senior Natural Scientist and the Paul O’ Neill Alcoa Professor of Health Policy at the RAND Corporation. There she directed RAND’s public health and preparedness work as well as RAND’s Center for Population Health and Health Disparities. She also served as Principal Deputy Assistant Secretary of Health in the US Department of Health and Human Services; in state government, as Medical Advisor to the Commissioner at the Minnesota Department of Health; and in academia, as Professor in the University of Minnesota Schools of Medicine and Public Health. Dr. Lurie has a long history in the health services research field, primarily in the areas of access to and quality of care, mental health, prevention, public health infrastructure and preparedness and health disparities.
Dr. Lurie attended college and medical school at the University of Pennsylvania, and completed her residency and MSPH at UCLA, where she was also a Robert Wood Johnson Foundation Clinical Scholar. She is the recipient of numerous awards, and is a member of the Institute of Medicine.
Finally, Dr. Lurie continues to practice clinical medicine in the health care safety net in Washington, DC. She has three sons.
Nicole Lurie
From Wikipedia, the free encyclopedia
[hide]This article has multiple issues. Please help improve it or discuss these issues on the talk page.
The Assistant Secretary for Preparedness and Response serves as the Secretary’s principal advisor on matters related to bioterrorism and other public health emergencies. The ASPR also coordinates interagency activities between HHS, other Federal departments, agencies, and offices, and State and local officials responsible for emergency preparedness and the protection of the civilian population from acts of bioterrorism and other public health emergencies.[2] The mission of her office is to lead the nation in preventing, responding to and recovering from the adverse health effects of public health emergencies and disasters. Dr. Lurie was nominated to the position by President Obama on May 12, 2009[3] and her confirmation by the U.S. Senate[4] was announced by HHS Secretary Kathleen Sebelius on July 10, 2009.[5]
Dr. Lurie has served as the Senior Natural Scientist and the Paul O’ Neill Alcoa Professor of Health Policy at the RAND Corporation.[7] There she directed RAND’s public health and preparedness work as well as RAND’s Center for Population Health and Health Disparities. She has previously served in federal government, as Principal Deputy Assistant Secretary of Health in the US Department of Health and Human Services; in state government, as Medical Advisor to the Commissioner at the Minnesota Department of Health; and in academia, as Professor in the University of Minnesota School of Medicine and the University of Minnesota School of Public Health. Dr. Lurie has a long history in the health services research field, primarily in the areas of access to and quality of care, managed care, mental health, prevention, public health infrastructure and preparedness and health disparities.
Lurie has served as the Senior Editor for Health Services Research and has served on editorial boards and as a reviewer for numerous journals. She has served on the council and was President of the Society of General Internal Medicine,[8] and on the board of directors for Academy Health, and has served on multiple other national committees.
Story 1: Asset Price Bubble Bursts Coming In October With 69 Months of Near Zero Federal Funds Interest Rates! — Interest Rate Suppression or Price Control and Manipulation Will Blow Up Economy — Suppressing Savings and Investment With Low Interest Rates Is A Formula For Diaster and Depression — Panic Time — Start A War Over Oil — Meltdown America –Videos
TABLE I -- SUMMARY OF TREASURY SECURITIES OUTSTANDING, AUGUST 31, 2014
(Millions of dollars)
Amount Outstanding
Title Debt Held Intragovernmental Totals
By the Public Holdings
Marketable:
Bills....................................... 1,450,293 1,704 1,451,998
Notes....................................... 8,109,269 7,365 8,116,634
Bonds....................................... 1,521,088 57 1,521,144
Treasury Inflation-Protected Securities..... 1,031,836 52 1,031,888
Floating Rate Notes 21 ................... 109,996 0 109,996
Federal Financing Bank 1 ................. 0 13,612 13,612
Total Marketable a........................... 12,222,481 22,790 2 12,245,271
Nonmarketable:
Domestic Series............................. 29,995 0 29,995
Foreign Series.............................. 2,986 0 2,986
State and Local Government Series........... 105,440 0 105,440
United States Savings Securities............ 177,030 0 177,030
Government Account Series................... 193,237 4,993,277 5,186,514
Hope Bonds 19............................... 0 494 494
Other....................................... 1,443 0 1,443
Total Nonmarketable b........................ 510,130 4,993,771 5,503,901
Total Public Debt Outstanding ................ 12,732,612 5,016,561 17,749,172
TABLE II -- STATUTORY DEBT LIMIT, AUGUST 31, 2014
(Millions of dollars)
Amount Outstanding
Title Debt Held Intragovernmental Totals
By the Public 17, 2Holdings
Debt Subject to Limit: 17, 20
Total Public Debt Outstanding............... 12,732,612 5,016,561 17,749,172
Less Debt Not Subject to Limit:
Other Debt ............................... 485 0 485
Unamortized Discount 3................... 15,742 12,421 28,163
Federal Financing Bank 1 ............ 0 13,612 13,612
Hope Bonds 19............................. 0 494 494
Plus Other Debt Subject to Limit:
Guaranteed Debt of Government Agencies 4 * 0 *
Total Public Debt Subject to Limit ......... 12,716,386 4,990,033 17,706,419
Statutory Debt Limit 5..................................................................... 0
COMPILED AND PUBLISHED BY
THE BUREAU OF THE FISCAL SERVICE
www.TreasuryDirect.gov
Interest Expense on the Debt Outstanding
The Interest Expense on the Debt Outstanding includes the monthly interest for:
Amortized discount or premium on bills, notes and bonds is also included in the monthly interest expense.
The fiscal year represents the total interest expense on the Debt Outstanding for a given fiscal year. This includes the months of October through September. View current month details (XLS Format, File size 199KB, uploaded 09/05/2014).
Note: To read or print a PDF document, you need the Adobe Acrobat Reader (v5.0 or higher) software installed on your computer. You can download the Adobe Acrobat Reader from the Adobe Website.
Even after the Dow and the S&P 500 closed at new all-time highs, closely followed contrarian Marc Faber keeps sounding the alarm.
“We have a bubble in everything, everywhere,” the publisher of The Gloom, Boom & Doom Report told CNBC’s “Squawk Box” on Friday. Faber has long argued that the Federal Reserve’s massive asset purchasing programs and near-zero interest rates have inflated stock prices.
The catalyst for a market decline, as he sees it, could be a “raise in interest rates, not engineered by the Fed,” referring an increase in bond yields.
Faber also expressed concern about American consumers. “Their cost of living have gone up more than the salary increases, so they’re getting squeezed. So that’s why retailing is not doing particularly well.”
A real black swan event, he argued, would be a global recession. “The big surprise will be that the global economy slows down and goes into recession. And that will shock markets.”
If economies around the world can’t recovery with the Fed and other central banks pumping easy money into the system, that would send a dire message, Faber added. He believes the best way for world economies to recover is to cut the size of government.
There’s a dual-economy in the U.S. and around the world with the rich doing really well and others struggling, he said. “[But] the rich will get creamed one day, especially in Europe, on wealth taxes.”
The Wharton School professor sees second half economic growth of 3 to 4 percent, S&P 500 earnings near $120, and the start of Fed rate hikes in the spring or summer of 2015
Fed and TWTR Overvaluation, Evidence of Looming Market Crash: Stockman
The Federal Reserve Wednesday reassured investors that it will hold interest rates near zero for a “considerable time” after it ends the bond-buying program known as quantitative easing in October. In response, the Dow Jones Industrial Average (^DJI) closed at a new record high.
Former Director of the Office of Management and Budget and author of the book, The Great Deformation, David Stockman, has significant concerns about that very policy.
“I’m worried… that we’ve got the greatest bubble created by a central bank in human history,” he told Yahoo Finance.
In a recent blog post, Stockman offered a handful of high-flying stocks as evidence of what he sees as “madness.”
“…Twitter, is all that is required to remind us that once
again markets are trading in the nosebleed section
of history, rivaling even the madness of March 2000.”
Behind the madness
In an interview with Yahoo Finance, Stockman blamed Fed policy for creating that madness.
“We have been shoving zero-cost money into the financial markets for 6-years running,” he said. “That’s the kerosene that drives speculative trading – the carry trades. That’s what the gamblers use to fund their position as they move from one momentum play and trade to another.”
And that, he says, is not sustainable. While Stockman believes tech stocks are especially overvalued, he warns that it’s not just tech valuations that are inflated. “Everything’s massively overvalued, and it’s predicated on zero-cost overnight money that continues these carry trades; It can’t continue.”
And he still believes, as he has for some time – so far, incorrectly – that there will be a day of reckoning.
“When the trades begin to unwind because the carry cost has to normalize, you’re going to have a dramatic re-pricing dislocation in these financial markets.”
As Yahoo Finance’s Lauren Lyster points out in the associated video, investors who heeded Stockman’s advice last year would have missed out on a 28% run-up in stocks. But Stockman remains steadfast in his belief that the current Fed policy and the resultant market behavior can not continue. “I think what the Fed is doing is so unprecedented, what is happening in the markets is so unnatural,” he said. “This is dangerous, combustible stuff, and I don’t know when the explosion occurs – when the collapse suddenly is upon us – but when it happens, people will be happy that they got out of the way if they did.”
Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks
September 11, 2014
1. Factors Affecting Reserve Balances of Depository Institutions
Millions of dollars
Reserve Bank credit, related items, and
reserve balances of depository institutions at
Federal Reserve Banks
Averages of daily figures
Wednesday
Sep 10, 2014
Week ended
Sep 10, 2014
Change from week ended
Sep 3, 2014
Sep 11, 2013
Reserve Bank credit
4,377,690
+ 4,183
+ 761,693
4,379,719
Securities held outright1
4,159,537
+ 2,675
+ 765,361
4,160,521
U.S. Treasury securities
2,439,657
+ 2,671
+ 401,376
2,440,637
Bills2
0
0
0
0
Notes and bonds, nominal2
2,325,368
+ 2,678
+ 386,333
2,326,351
Notes and bonds, inflation-indexed2
97,755
0
+ 11,737
97,755
Inflation compensation3
16,534
– 7
+ 3,306
16,531
Federal agency debt securities2
41,562
0
– 22,868
41,562
Mortgage-backed securities4
1,678,317
+ 4
+ 386,851
1,678,322
Unamortized premiums on securities held outright5
208,963
– 219
+ 5,815
208,907
Unamortized discounts on securities held outright5
-18,664
+ 21
– 12,958
-18,654
Repurchase agreements6
0
0
0
0
Loans
291
– 8
+ 18
352
Primary credit
10
– 18
– 8
53
Secondary credit
0
0
0
0
Seasonal credit
247
+ 9
+ 94
266
Term Asset-Backed Securities Loan Facility7
34
0
– 68
34
Other credit extensions
0
0
0
0
Net portfolio holdings of Maiden Lane LLC8
1,664
– 1
+ 171
1,665
Net portfolio holdings of Maiden Lane II LLC9
63
0
– 1
63
Net portfolio holdings of Maiden Lane III LLC10
22
0
0
22
Net portfolio holdings of TALF LLC11
44
0
– 80
44
Float
-675
– 69
+ 94
-627
Central bank liquidity swaps12
77
+ 1
– 243
77
Other Federal Reserve assets13
26,369
+ 1,784
+ 3,517
27,349
Foreign currency denominated assets14
22,933
– 353
– 737
22,801
Gold stock
11,041
0
0
11,041
Special drawing rights certificate account
5,200
0
0
5,200
Treasury currency outstanding15
46,103
+ 14
+ 820
46,103
Total factors supplying reserve funds
4,462,967
+ 3,844
+ 761,776
4,464,863
Note: Components may not sum to totals because of rounding. Footnotes appear at the end of the table.
1. Factors Affecting Reserve Balances of Depository Institutions (continued)
Millions of dollars
Reserve Bank credit, related items, and
reserve balances of depository institutions at
Federal Reserve Banks
Averages of daily figures
Wednesday
Sep 10, 2014
Week ended
Sep 10, 2014
Change from week ended
Sep 3, 2014
Sep 11, 2013
Currency in circulation15
1,292,467
– 442
+ 84,956
1,291,993
Reverse repurchase agreements16
266,584
+ 818
+ 173,996
267,602
Foreign official and international accounts
102,228
– 296
+ 9,640
107,303
Others
164,356
+ 1,115
+ 164,356
160,299
Treasury cash holdings
165
+ 4
+ 23
164
Deposits with F.R. Banks, other than reserve balances
52,715
– 6,170
– 19,233
53,117
Term deposits held by depository institutions
0
0
0
0
U.S. Treasury, General Account
39,081
– 3,787
+ 530
31,872
Foreign official
5,432
– 1,134
– 3,562
5,241
Other17
8,202
– 1,248
– 16,201
16,004
Other liabilities and capital18
63,991
– 1
+ 818
63,033
Total factors, other than reserve balances,
absorbing reserve funds
1,675,922
– 5,792
+ 240,561
1,675,910
Reserve balances with Federal Reserve Banks
2,787,045
+ 9,636
+ 521,214
2,788,954
Note: Components may not sum to totals because of rounding.
1.
Includes securities lent to dealers under the overnight securities lending facility; refer to table 1A.
2.
Face value of the securities.
3.
Compensation that adjusts for the effect of inflation on the original face value of inflation-indexed securities.
4.
Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. The current face value shown is the remaining principal balance of
the securities.
5.
Reflects the premium or discount, which is the difference between the purchase price and the face value of the securities that has not been amortized. For U.S. Treasury and Federal agency debt securities, amortization is on a straight-line basis. For mortgage-backed securities, amortization is on an effective-interest basis.
6.
Cash value of agreements.
7.
Includes credit extended by the Federal Reserve Bank of New York to eligible borrowers through the Term Asset-Backed Securities Loan Facility.
8.
Refer to table 4 and the note on consolidation accompanying table 9.
9.
Refer to table 5 and the note on consolidation accompanying table 9.
10.
Refer to table 6 and the note on consolidation accompanying table 9.
11.
Refer to table 7 and the note on consolidation accompanying table 9.
12.
Dollar value of foreign currency held under these agreements valued at the exchange rate to be used when the foreign currency is returned
to the foreign central bank. This exchange rate equals the market exchange rate used when the foreign currency was acquired from the
foreign central bank.
13.
Includes accrued interest, which represents the daily accumulation of interest earned, and other accounts receivable. Also, includes Reserve Bank premises and equipment net of allowances for depreciation.
14.
Revalued daily at current foreign currency exchange rates.
15.
Estimated.
16.
Cash value of agreements, which are collateralized by U.S. Treasury securities, federal agency debt securities, and mortgage-backed securities.
17.
Includes deposits held at the Reserve Banks by international and multilateral organizations, government-sponsored enterprises, and designated financial market utilities.
18.
Includes the liabilities of Maiden Lane LLC, Maiden Lane II LLC, Maiden Lane III LLC, and TALF LLC to entities other than the Federal Reserve Bank of New York, including liabilities that have recourse only to the portfolio holdings of these LLCs. Refer to table 4 through table 7 and the note on consolidation accompanying table 9. Also includes the liability for interest on Federal Reserve notes due to U.S. Treasury. Refer to table 8 and table 9.
Sources: Federal Reserve Banks and the U.S. Department of the Treasury.
1A. Memorandum Items
Millions of dollars
Memorandum item
Averages of daily figures
Wednesday
Sep 10, 2014
Week ended
Sep 10, 2014
Change from week ended
Sep 3, 2014
Sep 11, 2013
Securities held in custody for foreign official and international accounts
3,338,309
– 417
+ 61,832
3,343,937
Marketable U.S. Treasury securities1
3,010,563
– 456
+ 86,414
3,016,027
Federal agency debt and mortgage-backed securities2
285,805
+ 28
– 29,008
285,934
Other securities3
41,942
+ 12
+ 4,427
41,976
Securities lent to dealers
10,669
+ 1,648
– 1,429
11,123
Overnight facility4
10,669
+ 1,648
– 1,429
11,123
U.S. Treasury securities
9,860
+ 1,721
– 1,405
10,373
Federal agency debt securities
810
– 72
– 23
750
Note: Components may not sum to totals because of rounding.
1.
Includes securities and U.S. Treasury STRIPS at face value, and inflation compensation on TIPS. Does not include securities pledged as collateral to foreign official and international account holders against reverse repurchase agreements with the Federal Reserve presented in tables 1, 8, and 9.
2.
Face value of federal agency securities and current face value of mortgage-backed securities, which is the remaining principal balance of the securities.
3.
Includes non-marketable U.S. Treasury securities, supranationals, corporate bonds, asset-backed securities, and commercial paper at face value.
4.
Face value. Fully collateralized by U.S. Treasury securities.
2. Maturity Distribution of Securities, Loans, and Selected Other Assets and Liabilities, September 10, 2014
Millions of dollars
Remaining Maturity
Within 15
days
16 days to
90 days
91 days to
1 year
Over 1 year
to 5 years
Over 5 year
to 10 years
Over 10
years
All
Loans1
118
234
0
0
0
…
352
U.S. Treasury securities2
Holdings
0
90
3,194
1,037,162
742,261
657,930
2,440,637
Weekly changes
0
0
0
+ 1,615
– 1
+ 2,037
+ 3,651
Federal agency debt securities3
Holdings
1,556
1,329
3,584
32,746
0
2,347
41,562
Weekly changes
0
0
0
0
0
0
0
Mortgage-backed securities4
Holdings
0
0
0
10
4,698
1,673,614
1,678,322
Weekly changes
0
0
0
0
+ 863
– 857
+ 6
Asset-backed securities held by
TALF LLC5
0
0
0
0
0
0
0
Repurchase agreements6
0
0
…
…
…
…
0
Central bank liquidity swaps7
77
0
0
0
0
0
77
Reverse repurchase agreements6
267,602
0
…
…
…
…
267,602
Term deposits
0
0
0
…
…
…
0
Note: Components may not sum to totals because of rounding.
…Not applicable.
1.
Excludes the loans from the Federal Reserve Bank of New York (FRBNY) to Maiden Lane LLC, Maiden Lane II LLC, Maiden
Lane III LLC, and TALF LLC. The loans were eliminated when preparing the FRBNY’s statement of condition consistent with consolidation
under generally accepted accounting principles.
2.
Face value. For inflation-indexed securities, includes the original face value and compensation that adjusts for the effect of inflation on the
original face value of such securities.
3.
Face value.
4.
Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. The current face value shown is the remaining principal balance of the securities.
5.
Face value of asset-backed securities held by TALF LLC, which is the remaining principal balance of the underlying assets.
6.
Cash value of agreements.
7.
Dollar value of foreign currency held under these agreements valued at the exchange rate to be used when the foreign currency is returned to
the foreign central bank. This exchange rate equals the market exchange rate used when the foreign currency was acquired from the foreign
central bank.
3. Supplemental Information on Mortgage-Backed Securities
Millions of dollars
Account name
Wednesday
Sep 10, 2014
Mortgage-backed securities held outright1
1,678,322
Commitments to buy mortgage-backed securities2
80,643
Commitments to sell mortgage-backed securities2
0
Cash and cash equivalents3
4
1.
Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. The current face value shown is the remaining principal balance of the securities.
2.
Current face value. Generally settle within 180 days and include commitments associated with outright transactions, dollar rolls, and coupon swaps.
3.
This amount is included in other Federal Reserve assets in table 1 and in other assets in table 8 and table 9.
4. Information on Principal Accounts of Maiden Lane LLC
Millions of dollars
Account name
Wednesday
Sep 10, 2014
Net portfolio holdings of Maiden Lane LLC1
1,665
Outstanding principal amount of loan extended by the Federal Reserve Bank of New York2
0
Accrued interest payable to the Federal Reserve Bank of New York2
0
Outstanding principal amount and accrued interest on loan payable to JPMorgan Chase & Co.3
0
1.
Fair value. Fair value reflects an estimate of the price that would be received upon selling an asset if the transaction were to be conducted in an orderly market on the measurement date. Revalued quarterly. This table reflects valuations as of June 30, 2014. Any assets purchased after
this valuation date are initially recorded at cost until their estimated fair value as of the purchase date becomes available.
2.
Book value. This amount was eliminated when preparing the Federal Reserve Bank of New York’s statement of condition consistent with consolidation under generally accepted accounting principles. Refer to the note on consolidation accompanying table 9.
3.
Book value. The fair value of these obligations is included in other liabilities and capital in table 1 and in other liabilities and accrued dividends in table 8 and table 9.
Note: On June 26, 2008, the Federal Reserve Bank of New York (FRBNY) extended credit to Maiden Lane LLC under the authority of section 13(3) of the Federal Reserve Act. This limited liability company was formed to acquire certain assets of Bear Stearns and to manage those assets through time to maximize repayment of the credit extended and to minimize disruption to financial markets. Payments by Maiden Lane LLC from the proceeds of the net portfolio holdings will be made in the following order: operating expenses of the LLC, principal due to the FRBNY, interest due to the FRBNY, principal due to JPMorgan Chase & Co., and interest due to JPMorgan Chase & Co. Any remaining funds will be paid to the FRBNY.
5. Information on Principal Accounts of Maiden Lane II LLC
Millions of dollars
Account name
Wednesday
Sep 10, 2014
Net portfolio holdings of Maiden Lane II LLC1
63
Outstanding principal amount of loan extended by the Federal Reserve Bank of New York2
0
Accrued interest payable to the Federal Reserve Bank of New York2
0
Deferred payment and accrued interest payable to subsidiaries of American International Group, Inc.3
0
1.
Fair value. Fair value reflects an estimate of the price that would be received upon selling an asset if the transaction were to be conducted in an orderly market on the measurement date. Revalued quarterly. This table reflects valuations as of June 30, 2014. Any assets purchased after
this valuation date are initially recorded at cost until their estimated fair value as of the purchase date becomes available.
2.
Book value. This amount was eliminated when preparing the Federal Reserve Bank of New York’s statement of condition consistent with consolidation under generally accepted accounting principles. Refer to the note on consolidation accompanying table 9.
3.
Book value. The deferred payment represents the portion of the proceeds of the net portfolio holdings due to subsidiaries of American
International Group, Inc. in accordance with the asset purchase agreement. The fair value of this payment and accrued interest payable are
included in other liabilities and capital in table 1 and in other liabilities and accrued dividends in table 8 and table 9.
Note: On December 12, 2008, the Federal Reserve Bank of New York (FRBNY) began extending credit to Maiden Lane II LLC under the authority of section 13(3) of the Federal Reserve Act. This limited liability company was formed to purchase residential mortgage-backed securities from the U.S. securities lending reinvestment portfolio of subsidiaries of American International Group, Inc. (AIG subsidiaries). Payments by Maiden Lane II LLC from the proceeds of the net portfolio holdings will be made in the following order: operating expenses of Maiden Lane II LLC, principal due to the FRBNY, interest due to the FRBNY, and deferred payment and interest due to AIG subsidiaries. Any remaining funds will be shared by the FRBNY and AIG subsidiaries.
6. Information on Principal Accounts of Maiden Lane III LLC
Millions of dollars
Account name
Wednesday
Sep 10, 2014
Net portfolio holdings of Maiden Lane III LLC1
22
Outstanding principal amount of loan extended by the Federal Reserve Bank of New York2
0
Accrued interest payable to the Federal Reserve Bank of New York2
0
Outstanding principal amount and accrued interest on loan payable to American International Group, Inc.3
0
1.
Fair value. Fair value reflects an estimate of the price that would be received upon selling an asset if the transaction were to be conducted in an orderly market on the measurement date. Revalued quarterly. This table reflects valuations as of June 30, 2014. Any assets purchased after
this valuation date are initially recorded at cost until their estimated fair value as of the purchase date becomes available.
2.
Book value. This amount was eliminated when preparing the Federal Reserve Bank of New York’s statement of condition consistent with consolidation under generally accepted accounting principles. Refer to the note on consolidation accompanying table 9.
3.
Book value. The fair value of these obligations is included in other liabilities and capital in table 1 and in other liabilities and accrued dividends in table 8 and table 9.
Note: On November 25, 2008, the Federal Reserve Bank of New York (FRBNY) began extending credit to Maiden Lane III LLC under the authority of section 13(3) of the Federal Reserve Act. This limited liability company was formed to purchase multi-sector collateralized debt obligations (CDOs) on which the Financial Products group of American International Group, Inc. (AIG) has written credit default swap (CDS) contracts. In connection with the purchase of CDOs, the CDS counterparties will concurrently unwind the related CDS transactions. Payments by Maiden Lane III LLC from the proceeds of the net portfolio holdings will be made in the following order: operating expenses of Maiden Lane III LLC, principal due to the FRBNY, interest due to the FRBNY, principal due to AIG, and interest due to AIG. Any remaining funds will be shared by the FRBNY and AIG.
7. Information on Principal Accounts of TALF LLC
Millions of dollars
Account name
Wednesday
Sep 10, 2014
Asset-backed securities holdings1
0
Other investments, net
44
Net portfolio holdings of TALF LLC
44
Outstanding principal amount of loan extended by the Federal Reserve Bank of New York2
0
Accrued interest payable to the Federal Reserve Bank of New York2
0
Funding provided by U.S. Treasury to TALF LLC, including accrued interest payable3
0
1.
Fair value. Fair value reflects an estimate of the price that would be received upon selling an asset if the transaction were to be conducted in an orderly market on the measurement date.
2.
Book value. This amount was eliminated when preparing the Federal Reserve Bank of New York’s statement of condition consistent with consolidation under generally accepted accounting principles. Refer to the note on consolidation accompanying table 9.
3.
Book value. The fair value of these obligations is included in other liabilities and capital in table 1 and in other liabilities and accrued dividends in table 8 and table 9.
Note: On November 25, 2008, the Federal Reserve announced the creation of the Term Asset-Backed Securities Loan Facility (TALF) under theauthority of section 13(3) of the Federal Reserve Act. The TALF is a facility under which the Federal Reserve Bank of New York (FRBNY) extended loans with a term of up to five years to holders of eligible asset-backed securities. The Federal Reserve closed the TALF for new loan extensions in 2010. The loans provided through the TALF to eligible borrowers are non-recourse, meaning that the obligation of the borrower can be discharged by surrendering the collateral to the FRBNY.
TALF LLC is a limited liability company formed to purchase and manage any asset-backed securities received by the FRBNY in connection with the decision of a borrower not to repay a TALF loan. TALF LLC has committed, for a fee, to purchase all asset-backed securities received by the FRBNY in conjunction with a TALF loan at a price equal to the TALF loan plus accrued but unpaid interest. Prior to January 15, 2013, the U.S. Treasury’s Troubled Asset Relief Program (TARP) committed backup funding to TALF LLC, providing credit protection to the FRBNY. However, the accumulated fees and income collected through the TALF and held by TALF LLC now exceed the remaining amount of TALF loans outstanding. Accordingly, the TARP credit protection commitment has been terminated, and TALF LLC has begun to distribute excess proceeds to the Treasury and the FRBNY. Any remaining funds will be shared by the FRBNY and the U.S. Treasury.
8. Consolidated Statement of Condition of All Federal Reserve Banks
Millions of dollars
Assets, liabilities, and capital
Eliminations from consolidation
Wednesday
Sep 10, 2014
Change since
Wednesday
Wednesday
Sep 3, 2014
Sep 11, 2013
Assets
Gold certificate account
11,037
0
0
Special drawing rights certificate account
5,200
0
0
Coin
1,930
+ 8
– 62
Securities, unamortized premiums and discounts, repurchase agreements, and loans
4,351,126
+ 3,534
+ 756,847
Securities held outright1
4,160,521
+ 3,657
+ 763,739
U.S. Treasury securities
2,440,637
+ 3,651
+ 399,549
Bills2
0
0
0
Notes and bonds, nominal2
2,326,351
+ 3,661
+ 385,784
Notes and bonds, inflation-indexed2
97,755
0
+ 10,546
Inflation compensation3
16,531
– 10
+ 3,219
Federal agency debt securities2
41,562
0
– 22,654
Mortgage-backed securities4
1,678,322
+ 6
+ 386,844
Unamortized premiums on securities held outright5
208,907
– 132
+ 5,820
Unamortized discounts on securities held outright5
-18,654
+ 19
– 12,787
Repurchase agreements6
0
0
0
Loans
352
– 10
+ 75
Net portfolio holdings of Maiden Lane LLC7
1,665
+ 1
+ 167
Net portfolio holdings of Maiden Lane II LLC8
63
0
– 1
Net portfolio holdings of Maiden Lane III LLC9
22
0
0
Net portfolio holdings of TALF LLC10
44
0
– 68
Items in process of collection
(0)
94
– 22
– 31
Bank premises
2,255
0
– 29
Central bank liquidity swaps11
77
+ 1
– 243
Foreign currency denominated assets12
22,801
– 404
– 925
Other assets13
25,095
+ 2,704
+ 3,719
Total assets
(0)
4,421,408
+ 5,821
+ 759,373
Note: Components may not sum to totals because of rounding. Footnotes appear at the end of the table.
8. Consolidated Statement of Condition of All Federal Reserve Banks (continued)
Millions of dollars
Assets, liabilities, and capital
Eliminations from consolidation
Wednesday
Sep 10, 2014
Change since
Wednesday
Wednesday
Sep 3, 2014
Sep 11, 2013
Liabilities
Federal Reserve notes, net of F.R. Bank holdings
1,247,980
– 2,086
+ 84,510
Reverse repurchase agreements14
267,602
+ 17,296
+ 175,438
Deposits
(0)
2,842,072
– 8,612
+ 499,663
Term deposits held by depository institutions
0
0
0
Other deposits held by depository institutions
2,788,954
– 24,799
+ 513,312
U.S. Treasury, General Account
31,872
+ 10,836
+ 1,852
Foreign official
5,241
– 1,326
– 3,524
Other15
(0)
16,004
+ 6,676
– 11,978
Deferred availability cash items
(0)
721
– 482
– 163
Other liabilities and accrued dividends16
6,693
– 299
– 1,529
Total liabilities
(0)
4,365,067
+ 5,817
+ 757,919
Capital accounts
Capital paid in
28,170
+ 2
+ 726
Surplus
28,170
+ 2
+ 726
Other capital accounts
0
0
0
Total capital
56,341
+ 4
+ 1,454
Note: Components may not sum to totals because of rounding.
1.
Includes securities lent to dealers under the overnight securities lending facility; refer to table 1A.
2.
Face value of the securities.
3.
Compensation that adjusts for the effect of inflation on the original face value of inflation-indexed securities.
4.
Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. The current face value shown is the remaining principal balance of the securities.
5.
Reflects the premium or discount, which is the difference between the purchase price and the face value of the securities that has not been amortized. For U.S. Treasury and Federal agency debt securities, amortization is on a straight-line basis. For mortgage-backed securities, amortization is on an effective-interest basis.
6.
Cash value of agreements, which are collateralized by U.S. Treasury and federal agency securities.
7.
Refer to table 4 and the note on consolidation accompanying table 9.
8.
Refer to table 5 and the note on consolidation accompanying table 9.
9.
Refer to table 6 and the note on consolidation accompanying table 9.
10.
Refer to table 7 and the note on consolidation accompanying table 9.
11.
Dollar value of foreign currency held under these agreements valued at the exchange rate to be used when the foreign currency is returned to
the foreign central bank. This exchange rate equals the market exchange rate used when the foreign currency was acquired from the foreign
central bank.
12.
Revalued daily at current foreign currency exchange rates.
13.
Includes accrued interest, which represents the daily accumulation of interest earned, and other accounts receivable.
14.
Cash value of agreements, which are collateralized by U.S. Treasury securities, federal agency debt securities, and mortgage-backed securities.
15.
Includes deposits held at the Reserve Banks by international and multilateral organizations, government-sponsored enterprises, and designated financial market utilities.
16.
Includes the liabilities of Maiden Lane LLC, Maiden Lane II LLC, Maiden Lane III LLC, and TALF LLC to entities other than the Federal
Reserve Bank of New York, including liabilities that have recourse only to the portfolio holdings of these LLCs. Refer to table 4 through table 7 and the note on consolidation accompanying table 9. Also includes the liability for interest on Federal Reserve notes due to U.S. Treasury.
9. Statement of Condition of Each Federal Reserve Bank, September 10, 2014
Millions of dollars
Assets, liabilities, and capital
Total
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas
Dallas
San
City
Francisco
Assets
Gold certificate account
11,037
352
4,125
338
464
824
1,349
706
278
173
291
880
1,257
Special drawing rights certificate acct.
5,200
196
1,818
210
237
412
654
424
150
90
153
282
574
Coin
1,930
32
94
124
123
320
222
276
25
46
153
182
332
Securities, unamortized premiums and discounts, repurchase agreements,
and loans
4,351,126
88,009
2,670,390
104,231
94,993
243,168
240,542
177,833
53,725
26,795
57,330
132,586
461,524
Securities held outright1
4,160,521
84,160
2,553,576
99,673
90,839
232,534
229,991
170,046
51,317
25,497
54,804
126,772
441,311
U.S. Treasury securities
2,440,637
49,370
1,497,974
58,470
53,288
136,409
134,917
99,752
30,104
14,957
32,149
74,367
258,881
Bills2
0
0
0
0
0
0
0
0
0
0
0
0
0
Notes and bonds3
2,440,637
49,370
1,497,974
58,470
53,288
136,409
134,917
99,752
30,104
14,957
32,149
74,367
258,881
Federal agency debt securities2
41,562
841
25,509
996
907
2,323
2,298
1,699
513
255
547
1,266
4,409
Mortgage-backed securities4
1,678,322
33,949
1,030,093
40,207
36,644
93,803
92,777
68,595
20,701
10,285
22,107
51,139
178,021
Unamortized premiums on securities held outright5
208,907
4,226
128,220
5,005
4,561
11,676
11,548
8,538
2,577
1,280
2,752
6,365
22,159
Unamortized discounts on securities held outright5
-18,654
-377
-11,449
-447
-407
-1,043
-1,031
-762
-230
-114
-246
-568
-1,979
Repurchase agreements6
0
0
0
0
0
0
0
0
0
0
0
0
0
Loans
352
1
44
0
0
0
34
11
61
132
20
17
33
Net portfolio holdings of Maiden
Lane LLC7
1,665
0
1,665
0
0
0
0
0
0
0
0
0
0
Net portfolio holdings of Maiden
Lane II LLC8
63
0
63
0
0
0
0
0
0
0
0
0
0
Net portfolio holdings of Maiden
Lane III LLC9
22
0
22
0
0
0
0
0
0
0
0
0
0
Net portfolio holdings of TALF LLC10
44
0
44
0
0
0
0
0
0
0
0
0
0
Items in process of collection
94
0
0
0
0
0
93
0
0
1
0
0
0
Bank premises
2,255
121
434
74
110
222
209
198
124
97
243
224
200
Central bank liquidity swaps11
77
4
25
6
6
16
4
2
1
0
1
1
11
Foreign currency denominated assets12
22,801
1,037
7,335
1,714
1,813
4,754
1,311
629
192
96
240
381
3,299
Other assets13
25,095
535
15,039
739
546
1,547
1,374
1,014
356
219
347
798
2,580
Interdistrict settlement account
0
+ 10,547
– 58,585
+ 2,678
+ 9,252
+ 197
+ 8,040
– 10,297
– 10,950
– 2,083
– 134
+ 2,635
+ 48,701
Total assets
4,421,408
100,833
2,642,468
110,114
107,543
251,460
253,799
170,787
43,900
25,434
58,623
137,969
518,478
Note: Components may not sum to totals because of rounding. Footnotes appear at the end of the table.
9. Statement of Condition of Each Federal Reserve Bank, September 10, 2014 (continued)
Millions of dollars
Assets, liabilities, and capital
Total
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas
Dallas
San
City
Francisco
Liabilities
Federal Reserve notes outstanding
1,443,974
44,572
489,349
42,766
65,118
103,568
212,875
94,569
37,360
21,242
36,783
115,911
179,862
Less: Notes held by F.R. Banks
195,994
5,311
63,063
6,357
8,870
11,177
20,690
11,915
4,937
4,278
5,302
25,736
28,359
Federal Reserve notes, net
1,247,980
39,261
426,285
36,409
56,248
92,391
192,186
82,654
32,423
16,964
31,481
90,175
151,503
Reverse repurchase agreements14
267,602
5,413
164,244
6,411
5,843
14,956
14,793
10,937
3,301
1,640
3,525
8,154
28,385
Deposits
2,842,072
53,409
2,030,175
62,876
40,791
131,999
42,547
75,315
7,510
6,356
22,882
38,429
329,783
Term deposits held by depository institutions
0
0
0
0
0
0
0
0
0
0
0
0
0
Other deposits held by depository institutions
2,788,954
53,397
1,977,410
62,837
40,788
131,731
42,538
75,306
7,510
6,355
22,881
38,428
329,774
U.S. Treasury, General Account
31,872
0
31,872
0
0
0
0
0
0
0
0
0
0
Foreign official
5,241
2
5,214
3
3
8
2
1
0
0
0
1
6
Other15
16,004
11
15,679
36
0
260
7
7
0
0
1
0
3
Deferred availability cash items
721
0
0
0
0
0
611
0
0
110
0
0
0
Interest on Federal Reserve notes due
to U.S. Treasury16
1,693
19
1,199
20
10
23
86
73
20
12
20
54
155
Other liabilities and accrued
dividends17
5,000
167
2,179
211
208
544
361
282
142
118
126
208
454
Total liabilities
4,365,067
98,270
2,624,083
105,927
103,101
239,913
250,583
169,261
43,395
25,200
58,034
137,021
510,279
Capital
Capital paid in
28,170
1,282
9,193
2,093
2,221
5,773
1,608
763
252
117
295
474
4,099
Surplus
28,170
1,282
9,193
2,093
2,221
5,773
1,608
763
252
117
295
474
4,099
Other capital
0
0
0
0
0
0
0
0
0
0
0
0
0
Total liabilities and capital
4,421,408
100,833
2,642,468
110,114
107,543
251,460
253,799
170,787
43,900
25,434
58,623
137,969
518,478
Note: Components may not sum to totals because of rounding. Footnotes appear at the end of the table.
9. Statement of Condition of Each Federal Reserve Bank, September 10, 2014 (continued)
1.
Includes securities lent to dealers under the overnight securities lending facility; refer to table 1A.
2.
Face value of the securities.
3.
Includes the original face value of inflation-indexed securities and compensation that adjusts for the effect of inflation on the original face value of such securities.
4.
Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. The current face value shown is the remaining principal balance of the securities.
5.
Reflects the premium or discount, which is the difference between the purchase price and the face value of the securities that has not been amortized. For U.S. Treasury and Federal agency debt securities, amortization is on a straight-line basis. For mortgage-backed securities, amortization is on an effective-interest basis.
6.
Cash value of agreements, which are collateralized by U.S. Treasury and federal agency securities.
7.
Refer to table 4 and the note on consolidation below.
8.
Refer to table 5 and the note on consolidation below.
9.
Refer to table 6 and the note on consolidation below.
10.
Refer to table 7 and the note on consolidation below.
11.
Dollar value of foreign currency held under these agreements valued at the exchange rate to be used when the foreign currency is returned to the foreign central bank. This exchange rate
equals the market exchange rate used when the foreign currency was acquired from the foreign central bank.
12.
Revalued daily at current foreign currency exchange rates.
13.
Includes accrued interest, which represents the daily accumulation of interest earned, and other accounts receivable.
14.
Cash value of agreements, which are collateralized by U.S. Treasury securities, federal agency debt securities, and mortgage-backed securities.
15.
Includes deposits held at the Reserve Banks by international and multilateral organizations, government-sponsored enterprises, and designated financial market utilities.
16.
Represents the estimated weekly remittances to U.S. Treasury as interest on Federal Reserve notes or, in those cases where the Reserve Bank’s net earnings are not sufficient to equate surplus to capital paid-in, the deferred asset for interest on Federal Reserve notes. The amount of any deferred asset, which is presented as a negative amount in this line, represents the amount of the Federal Reserve Bank’s earnings that must be retained before remittances to the U.S. Treasury resume. The amounts on this line are calculated in accordance with Board of Governors policy, which requires the Federal Reserve Banks to remit residual earnings to the U.S. Treasury as interest on Federal Reserve notes after providing for the costs of operations, payment of dividends, and the amount necessary to equate surplus with capital paid-in.
17.
Includes the liabilities of Maiden Lane LLC, Maiden Lane II LLC, Maiden Lane III LLC, and TALF LLC to entities other than the Federal Reserve Bank of New York, including liabilities that have recourse only to the portfolio holdings of these LLCs. Refer to table 4 through table 7 and the note on consolidation below.
Note on consolidation:
The Federal Reserve Bank of New York (FRBNY) has extended loans to several limited liability companies under the authority of section 13(3) of the Federal Reserve Act. On June 26, 2008, a loan was extended to Maiden Lane LLC, which was formed to acquire certain assets of Bear Stearns. On November 25, 2008, a loan was extended to Maiden Lane III LLC, which was formed to purchase multi-sector collateralized debt obligations on which the Financial Products group of the American International Group, Inc. has written credit default swap contracts. On December 12, 2008, a loan was extended to Maiden Lane II LLC, which was formed to purchase residential mortgage-backed securities from the U.S. securities lending reinvestment portfolio of subsidiaries of American International Group, Inc. On November 25, 2008, the Federal Reserve Board authorized the FRBNY to extend credit to TALF LLC, which was formed to purchase and manage any asset-backed securities received by the FRBNY in connection with the decision of a borrower not to repay a loan extended under the Term Asset-Backed Securities Loan Facility.
The FRBNY is the primary beneficiary of TALF LLC, because of the two beneficiaries of the LLC, the FRBNY and the U.S. Treasury, the FRBNY is primarily responsible for directing the financial activities of TALF LLC. The FRBNY is the primary beneficiary of the other LLCs cited above because it will receive a majority of any residual returns of the LLCs and absorb a majority of any residual losses of the LLCs. Consistent with generally accepted accounting principles, the assets and liabilities of these LLCs have been consolidated with the assets and liabilities of the FRBNY in the preparation of the statements of condition shown on this release. As a consequence of the consolidation, the extensions of credit from the FRBNY to the LLCs are eliminated, the net assets of the LLCs appear as assets on the previous page (and in table 1 and table 8), and the liabilities of the LLCs to entities other than the FRBNY, including those with recourse only to the portfolio holdings of the LLCs, are included in other liabilities in this table (and table 1 and table 8).
10. Collateral Held against Federal Reserve Notes: Federal Reserve Agents’ Accounts
Millions of dollars
Federal Reserve notes and collateral
Wednesday
Sep 10, 2014
Federal Reserve notes outstanding
1,443,974
Less: Notes held by F.R. Banks not subject to collateralization
195,994
Federal Reserve notes to be collateralized
1,247,980
Collateral held against Federal Reserve notes
1,247,980
Gold certificate account
11,037
Special drawing rights certificate account
5,200
U.S. Treasury, agency debt, and mortgage-backed securities pledged1,2
1,231,743
Other assets pledged
0
Memo:
Total U.S. Treasury, agency debt, and mortgage-backed securities1,2
4,160,521
Less: Face value of securities under reverse repurchase agreements
257,508
U.S. Treasury, agency debt, and mortgage-backed securities eligible to be pledged
3,903,013
Note: Components may not sum to totals because of rounding.
1.
Includes face value of U.S. Treasury, agency debt, and mortgage-backed securities held outright, compensation to adjust for the effect of inflation on the original face value of inflation-indexed securities, and cash value of repurchase agreements.
2.
Includes securities lent to dealers under the overnight securities lending facility; refer to table 1A.
Segment 0: After 6 Years Employment Level of 144.4 Million Still Below Previous Peak of 146.6 Million in November 2007 — 2.2 Million Short — Plus 9 Million To 11 Million New Entrants — Obama Job Shortage 11 Million to 13 Million! — Obama’s Economic Policies and Obamacare Not Working! — Videos
Alternate Unemployment Charts
The seasonally-adjusted SGS Alternate Unemployment Rate reflects current unemployment reporting methodology adjusted for SGS-estimated long-term discouraged workers, who were defined out of official existence in 1994. That estimate is added to the BLS estimate of U-6 unemployment, which includes short-term discouraged workers.
The U-3 unemployment rate is the monthly headline number. The U-6 unemployment rate is the Bureau of Labor Statistics’ (BLS) broadest unemployment measure, including short-term discouraged and other marginally-attached workers as well as those forced to work part-time because they cannot find full-time employment.
December 6th 2013 CNBC Stock Market Squawk Box (November Jobs Report)
November Unemployment Rate Falls To 7% – Crowley: If This Numbers Are To Be Believed Thats A Big If
Jobs report doesn’t improve outlook for long-term jobless
Nightly Business Report — December 6, 2013
Stock Markets Latest News: Wall St. Eyes Weekly Gain After Jobs Report
Bob Browne: Last week’s strong U.S. jobs report — December 9, 2013
The long-term effects of unemployment among young workers
Friday, December 6, 2013
Larry Kudlow Admits to Being Wrong About Bernanke And The Economy NOT PETER SCHIFF THOUGH!
Employment Level
144,386,000
Series Id: LNS12000000
Seasonally Adjusted Series title: (Seas) Employment Level Labor force status: Employed Type of data: Number in thousands Age: 16 years and over
Year
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Annual
2000
136559(1)
136598
136701
137270
136630
136940
136531
136662
136893
137088
137322
137614
2001
137778
137612
137783
137299
137092
136873
137071
136241
136846
136392
136238
136047
2002
135701
136438
136177
136126
136539
136415
136413
136705
137302
137008
136521
136426
2003
137417(1)
137482
137434
137633
137544
137790
137474
137549
137609
137984
138424
138411
2004
138472(1)
138542
138453
138680
138852
139174
139556
139573
139487
139732
140231
140125
2005
140245(1)
140385
140654
141254
141609
141714
142026
142434
142401
142548
142499
142752
2006
143150(1)
143457
143741
143761
144089
144353
144202
144625
144815
145314
145534
145970
2007
146028(1)
146057
146320
145586
145903
146063
145905
145682
146244
145946
146595
146273
2008
146378(1)
146156
146086
146132
145908
145737
145532
145203
145076
144802
144100
143369
2009
142153(1)
141644
140721
140652
140250
140005
139898
139481
138810
138421
138665
138025
2010
138439(1)
138624
138767
139296
139255
139148
139167
139405
139388
139097
139046
139295
2011
139253(1)
139471
139643
139606
139681
139405
139509
139870
140164
140314
140771
140896
2012
141608(1)
142019
142020
141934
142302
142448
142250
142164
142974
143328
143277
143305
2013
143322(1)
143492
143286
143579
143898
144058
144285
144170
144303
143568
144386
1 : Data affected by changes in population controls.
Civilian Labor Force Level
155,254,000
Series Id: LNS11000000
Seasonally Adjusted Series title: (Seas) Civilian Labor Force Level Labor force status: Civilian labor force Type of data: Number in thousands Age: 16 years and over
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Fed Desperate To Rise Above the Near Zero Fed Funds Rate Target Range — Need Three Months Of 300,000 Plus Per Month Job Creation, Wage Growth and 3% First Quarter 2015 Real Gross Domestic Product Growth Numbers To Jump to .5 – 1.0% Range Fed Funds Rate Target — June 2015 Launch Date Expected — Fly Me To The Moon — Summertime — Launch — Abort On Recession — Videos
Posted on March 22, 2015. Filed under: American History, Banking, Blogroll, Books, Business, College, Communications, Constitution, Crisis, Culture, Demographics, Documentary, Economics, Education, Employment, Energy, Entertainment, Family, Federal Communications Commission, Federal Government, Federal Government Budget, Fiscal Policy, Food, Foreign Policy, Freedom, Friends, Government Land Ownership, government spending, Health Care, history, Illegal, Immigration, Language, Law, liberty, Life, Links, Macroeconomics, Microeconomics, Monetary Policy, Money, Music, Music, Natural Gas, Natural Gas, Non-Fiction, Obamacare, Oil, Oil, People, Philosophy, Photos, Politics, Press, Psychology, Rants, Raves, Regulations, Resources, Reviews, Strategy, Talk Radio, Tax Policy, Taxes, Unemployment, Video, War, Water, Wealth, Weather, Welfare, Wisdom, Writing | Tags: 19 March 2015, Abolish The Fed, America, Angelina Jordan, articles, Audio, Breaking News, Broadcasting, capitalism, Cartoons, Chair Janet Yellen, Charity, Citizenship, Clarity, Classical Liberalism, Collectivism, Commentary, Commitment, Communicate, Communication, Concise, Convincing, Courage, Culture, Current Affairs, Current Events, depression, Discretionary Monetary Policy, Dual Mandate, economic growth, economic policy, Economic Recovery, Economics, Education, Evil, Experience, Faith, Family, Fed Funds Rate Target Range, Federal Open Market Committee, First, fiscal policy, Fly Me To The Moon, FOMC, FOMC minutes, Forrest Gump, free enterprise, freedom, freedom of speech, Friedrich Hayek, Friends, Give It A Listen, God, Good, Goodwill, Growth, Hope, Individualism, Intellectuals and Society, Janet Yellen, Job Creation, John Maynard Keynes, Joseph Salerno, Knowledge, Larry Kotlikoff, liberty, Life, Love, Lovers of Liberty, Milton Friedman, monetary policy, Movies, MPEG3, Murray N. Rothbard, Music, News, Opinions, Peace, Peter Schiff, Photos, Podcasts, Political Philosophy, Politics, prosperity, Radio, Raymond Thomas Pronk, Real Gross Domestic Product, Recession, Representative Republic, Republic, Resources, Respect, rule of law, Rule of Men, Show Notes, Social Justice, Socialism, Songs, Talk Radio, Taylor rule, The Fed, The Federal Reserve System, The Pronk Pops Show, The Pronk Pops Show 430, Thomas Sowell, Truth, Tyranny, U.S. Constitution, Unemployment Rates, United States of America, Videos, Virtue, Wage Growth, War, Wisdom |
The Pronk Pops Show Podcasts
Pronk Pops Show 430: March 19, 2015
Pronk Pops Show 429: March 18, 2015
Pronk Pops Show 428: March 17, 2015
Pronk Pops Show 427: March 16, 2015
Pronk Pops Show 426: March 6, 2015
Pronk Pops Show 425: March 4, 2015
Pronk Pops Show 424: March 2, 2015
Pronk Pops Show 423: February 26, 2015
Pronk Pops Show 422: February 25, 2015
Pronk Pops Show 421: February 20, 2015
Pronk Pops Show 420: February 19, 2015
Pronk Pops Show 419: February 18, 2015
Pronk Pops Show 418: February 16, 2015
Pronk Pops Show 417: February 13, 2015
Pronk Pops Show 416: February 12, 2015
Pronk Pops Show 415: February 11, 2015
Pronk Pops Show 414: February 10, 2015
Pronk Pops Show 413: February 9, 2015
Pronk Pops Show 412: February 6, 2015
Pronk Pops Show 411: February 5, 2015
Pronk Pops Show 410: February 4, 2015
Pronk Pops Show 409: February 3, 2015
Pronk Pops Show 408: February 2, 2015
Pronk Pops Show 407: January 30, 2015
Pronk Pops Show 406: January 29, 2015
Pronk Pops Show 405: January 28, 2015
Pronk Pops Show 404: January 27, 2015
Pronk Pops Show 403: January 26, 2015
Pronk Pops Show 402: January 23, 2015
Pronk Pops Show 401: January 22, 2015
Pronk Pops Show 400: January 21, 2015
Pronk Pops Show 399: January 16, 2015
Pronk Pops Show 398: January 15, 2015
Pronk Pops Show 397: January 14, 2015
Pronk Pops Show 396: January 13, 2015
Pronk Pops Show 395: January 12, 2015
Pronk Pops Show 394: January 7, 2015
Pronk Pops Show 393: January 5, 2015
Pronk Pops Show 392: December 19, 2014
Pronk Pops Show 391: December 18, 2014
Pronk Pops Show 390: December 17, 2014
Pronk Pops Show 389: December 16, 2014
Pronk Pops Show 388: December 15, 2014
Pronk Pops Show 387: December 12, 2014
Pronk Pops Show 386: December 11, 2014
Pronk Pops Show 385: December 9, 2014
Pronk Pops Show 384: December 8, 2014
Pronk Pops Show 383: December 5, 2014
Pronk Pops Show 382: December 4, 2014
Pronk Pops Show 381: December 3, 2014
Pronk Pops Show 380: December 1, 2014
Story 1: Fed Desperate To Rise Above the Near Zero Fed Funds Rate Target Range — Need Three Months Of 300,000 Plus Per Month Job Creation, Wage Growth and 3% First Quarter 2015 Real Gross Domestic Product Growth Numbers To Jump to .5 – 1.0% Range Fed Funds Rate Target — June 2015 Launch Date Expected — Fly Me To The Moon — Summertime — Launch — Abort On Recession — Videos
Amazing seven year old sings Fly Me To The Moon (Angelina Jordan) on Senkveld “The Late Show”
Forrest Gump JFK “I Gotta Pee” Scene
Fed Decision: The Three Most Important Things Janet Yellen Said
Press Conference with Chair of the FOMC, Janet L. Yellen
Monetary Policy Based on the Taylor Rule
Many economists believe that rules-based monetary policy provides better economic outcomes than a purely discretionary framework delivers. But there is disagreement about the advantages of rules-based policy and even disagreement about which rule works. One possible policy rule would be for the central bank to follow a Taylor Rule, named after our featured speaker, John B. Taylor. What would some of the advantages of a Taylor Rule be versus, for instance, a money growth rule, or a rule which only specifies the inflation target? How could a policy rule be implemented? Should policy rule legislation be considered? Join us as Professor Taylor addresses these important policy questions.
Murray N. Rothbard on Milton Friedman pre1971
On Milton Friedman | by Murray N. Rothbard
Who Was the Better Monetary Economist? Rothbard and Friedman Compared | Joseph T. Salerno
Joseph Salerno “Unmasking the Federal Reserve”
Rothbard on Alan Greenspan
Milton Friedman – Money and Inflation
Milton Friedman – Abolish The Fed
Milton Friedman On John Maynard Keynes
Hayek on Keynes’s Ignorance of Economics
Friedrich Hayek explains to Leo Rosten that while brilliant Keynes had a parochial understanding of economics.
On John Maynard Keynes | by Murray N. Rothbard
Hayek on Milton Friedman and Monetary Policy
Friedrich Hayek: Why Intellectuals Drift Towards Socialism
Capitalism, Socialism, and the Jews
The Normal State of Man: Misery & Tyranny
Peter Schiff Interviews Keynesian Economist Laurence Kotlikoff 01-18-12
Larry Kotlikoff on the Clash of Generations
Extended interview with Boston University Economics Professor Larry Kotlikoff on his publications about a six-decade long Ponzi scheme in the US which he says will lead to a clash of generations.
Kotlikoff also touches on what his projections mean for the New Zealand economy and why Prime Minister John Key should take more attention of New Zealand’s ‘fiscal gap’ – the gap between all future government spending commitments and its future revenue track.
Thomas Sowell on Intellectuals and Society
Angelina Jordan – summertime
Angelina Jordan synger Sinatra i semifinalen i Norske Talenter 2014
Release Date: March 18, 2015
For immediate release
Information received since the Federal Open Market Committee met in January suggests that economic growth has moderated somewhat. Labor market conditions have improved further, with strong job gains and a lower unemployment rate. A range of labor market indicators suggests that underutilization of labor resources continues to diminish. Household spending is rising moderately; declines in energy prices have boosted household purchasing power. Business fixed investment is advancing, while the recovery in the housing sector remains slow and export growth has weakened. Inflation has declined further below the Committee’s longer-run objective, largely reflecting declines in energy prices. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of energy price declines and other factors dissipate. The Committee continues to monitor inflation developments closely.
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. In determining how long to maintain this target range, the Committee will assess progress–both realized and expected–toward 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. 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. This change in the forward guidance does not indicate that the Committee has decided on the timing of the initial increase in the target range.
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.
When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.
Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Jeffrey M. Lacker; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John C. Williams.
http://www.federalreserve.gov/newsevents/press/monetary/20150318a.htm
Advance release of table 1 of the Summary of Economic Projections to be released with the FOMC minutes
Percent
Note: Projections of change in real gross domestic product (GDP) and projections for both measures of inflation are percent changes from the fourth quarter of the previous year to the fourth quarter of the year indicated. PCE inflation and core PCE inflation are the percentage rates of change in, respectively, the price index for personal consumption expenditures (PCE) and the price index for PCE excluding food and energy. Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated. Each participant’s projections are based on his or her assessment of appropriate monetary policy. Longer-run projections represent each participant’s assessment of the rate to which each variable would be expected to converge under appropriate monetary policy and in the absence of further shocks to the economy. The December projections were made in conjunction with the meeting of the Federal Open Market Committee on December 16-17, 2014.
1. The central tendency excludes the three highest and three lowest projections for each variable in each year. Return to table
2. The range for a variable in a given year includes all participants’ projections, from lowest to highest, for that variable in that year. Return to table
3. Longer-run projections for core PCE inflation are not collected. Return to table
Figure 1. Central tendencies and ranges of economic projections, 2015-17 and over the longer run
Central tendencies and ranges of economic projections for years 2015 through 2017 and over the longer run. Actual values for years 2010 through 2014.
Change in real GDP
Percent
Unemployment rate
Percent
PCE inflation
Percent
Note: Definitions of variables are in the general note to the projections table. The data for the actual values of the variables are annual.
Figure 2. Overview of FOMC participants’ assessments of appropriate monetary policy
Appropriate timing of policy firming
Note: In the upper panel, the height of each bar denotes the number of FOMC participants who judge that, under appropriate monetary policy, the first increase in the target range for the federal funds rate from its current range of 0 to 1/4 percent will occur in the specified calendar year. In December 2014, the numbers of FOMC participants who judged that the first increase in the target federal funds rate would occur in 2015, and 2016 were, respectively, 15, and 2.
Appropriate pace of policy firming: Midpoint of target range or target level for the federal funds rate
Number of participants with projected midpoint of target range or target level
or target level (Percent)
Note: In the lower panel, each shaded circle indicates the value (rounded to the nearest 1/8 percentage point) of an individual participant’s judgment of the midpoint of the appropriate target range for the federal funds rate or the appropriate target level for the federal funds rate at the end of the specified calendar year or over the longer run.
http://www.federalreserve.gov/monetarypolicy/fomcprojtabl20150318.htm
Janet Yellen Isn’t Going to Raise Interest Rates Until She’s Good and Ready
The key words in Janet L. Yellen’s news conference Wednesday were rather pithy, at least by central bank standards. “Just because we removed the word ‘patient’ from the statement doesn’t mean we are going to be impatient,” Ms. Yellen, the Federal Reserve chairwoman, said.
With this framing, Ms. Yellen was putting her firm stamp on the policy of an institution she has led for just over a year — and making clear that she will not be boxed in. Her words and accompanying announcements conveyed the message that the Yellen Fed has no intention of taking the support struts of low interest rates away until she is absolutely confident that economic growth will hold up without them.
Ms. Yellen’s comments about patience versus impatience were part of that dance. But the dual message was even more powerful when combined with other elements of the central bank’s newly released information, which sent the signal that members of the committee intend to move cautiously on rate increases.
By eliminating the reference to “patience,” Paul Edelstein, an economist at IHS Global Insight, said in a research note, “The Fed did what it was expected to do.”
“But beyond that,” he added, “the committee appeared much more dovish and in not much of a hurry to actually pull the trigger.”
Fed officials’ forecasts of how high rates will be at year’s end for 2015, 2016 and 2017 all fell compared to where they were in December. They marked down their forecast for economic growth and inflation for all three years, implying that the nation’s economic challenge is tougher and inflation risks more distant than they had seemed a few months ago.
Particularly interesting was that Fed officials lowered their estimate of the longer-run unemployment rate, to 5 to 5.2 percent, from 5.2 to 5.5 percent. With joblessness hitting 5.5 percent in February, that implied that policy makers are convinced the job market has more room to tighten before it becomes too tight. Fed leaders now forecast unemployment rates in 2016 and 2017 that are a bit below what many view as the long-term sustainable level, which one would expect to translate into rising wages.
In other words, they want to run the economy a little hot for the next couple of years to help spur the kinds of wage gains that might return inflation to the 2 percent level they aim for, but which they have persistently undershot in recent years.
Apart from the details of the dovish monetary policy signals Ms. Yellen and her colleagues sent, it is clear she wanted to jolt markets out of any feeling that policy is on a preordained path.
At times over the last couple of years, the Fed had seemed to set a policy course and then go on a forced march until it got there, regardless of whether the jobs numbers were good or bad, or whether inflation was rising or falling. That is certainly how it felt when the Fed decided in December 2013 to wind down its quantitative easing policies by $10 billion per meeting, which it did through the first nine months of 2014 with few signs of re-evaluation as conditions evolved.
In her first news conference as chairwoman a year ago, Ms. Yellen had suggested that rate increases might be on a similar preordained path by saying that she could imagine rate increases “around six months” after the conclusion of quantitative easing. (That comment increasingly looks to have been a rookie mistake, and she later backed away from it.)
There are likely to be plenty of twists and turns in the coming months. After this week’s meeting, Ms. Yellen reinforced the message she has been trying to convey that the committee really will adapt its policy to incoming information rather than simply carry on with the path it set a year ago.
If the strengthening dollar and falling oil prices start to translate into still-lower expectations for future inflation, the Fed will hold off from rate rises — and the same if wage gains and other job market indicators show a lack of progress.
Conversely, if the job market recovery keeps going gangbusters and it becomes clear that inflation is going to rise back toward 2 percent, Ms. Yellen does not want to be constrained by language about “patience.”
“This change does not necessarily mean that an increase will occur in June,” Ms. Yellen said, “though we cannot rule that out.”
She has now bought herself some latitude to decide when and how the Fed ushers in an era of tighter money. Now the question is just how patient or impatient American economic conditions will allow her to be.
http://www.nytimes.com/2015/03/19/upshot/janet-yellen-isnt-going-to-raise-interest-rates-until-shes-good-and-ready.html?_r=0&abt=0002&abg=1
Taylor rule
John B. Taylor
In economics, a Taylor rule is a monetary-policy rule that stipulates how much the central bank should change the nominal interest rate in response to changes in inflation, output, or other economic conditions. In particular, the rule stipulates that for each one-percent increase in inflation, the central bank should raise the nominal interest rate by more than one percentage point. This aspect of the rule is often called the Taylor principle.
The rule of was first proposed by John B. Taylor,[1] and simultaneously by Dale W. Henderson and Warwick McKibbin in 1993.[2] It is intended to foster price stability and full employment by systematically reducing uncertainty and increasing the credibility of future actions by the central bank. It may also avoid the inefficiencies of time inconsistency from the exercise ofdiscretionary policy.[3][4] The Taylor rule synthesized, and provided a compromise between, competing schools of economics thought in a language devoid of rhetorical passion.[5] Although many issues remain unresolved and views still differ about how the Taylor rule can best be applied in practice, research shows that the rule has advanced the practice of central banking.[6]
As an equation
According to Taylor’s original version of the rule, the nominal interest rate should respond to divergences of actual inflation rates from target inflation rates and of actual Gross Domestic Product (GDP) from potential GDP:
In this equation,
is the target short-term nominal interest rate (e.g. the federal funds rate in the US, the Bank of England base rate in the UK), 
is the rate ofinflation as measured by the GDP deflator, 
is the desired rate of inflation, 
is the assumed equilibrium real interest rate, 
is the logarithm of real GDP, and 
is the logarithm of potential output, as determined by a linear trend.
In this equation, both
and 
should be positive (as a rough rule of thumb, Taylor’s 1993 paper proposed setting 
).[7] That is, the rule “recommends” a relatively high interest rate (a “tight” monetary policy) when inflation is above its target or when output is above its full-employment level, in order to reduce inflationary pressure. It recommends a relatively low interest rate (“easy” monetary policy) in the opposite situation, to stimulate output. Sometimes monetary policy goals may conflict, as in the case of stagflation, when inflation is above its target while output is below full employment. In such a situation, a Taylor rule specifies the relative weights given to reducing inflation versus increasing output.
The Taylor principle
By specifying
, the Taylor rule says that an increase in inflation by one percentage point should prompt the central bank to raise the nominal interest rate by more than one percentage point (specifically, by 
, the sum of the two coefficients on 
in the equation above). Since the real interest rate is (approximately) the nominal interest rate minus inflation, stipulating 
implies that when inflation rises, the real interest rate should be increased. The idea that the real interest rate should be raised to cool the economy when inflation increases (requiring the nominal interest rate to increase more than inflation does) has sometimes been called the Taylor principle.[8]
During an EconTalk podcast Taylor explained the rule in simple terms using three variables: inflation rate, GDP growth, and the interest rate. If inflation were to rise by 1%, the proper response would be to raise the interest rate by 1.5% (Taylor explains that it doesn’t always need to be exactly 1.5%, but being larger than 1% is essential). If GDP falls by 1% relative to its growth path, then the proper response is to cut the interest rate by .5%.[9]
Alternative versions of the rule
While the Taylor principle has proved very influential, there is more debate about the other terms that should enter into the rule. According to some simple New Keynesian macroeconomic models, insofar as the central bank keeps inflation stable, the degree of fluctuation in output will be optimized (Blanchard and Gali call this property the ‘divine coincidence‘). In this case, the central bank need not take fluctuations in the output gap into account when setting interest rates (that is, it may optimally set
.) On the other hand, other economists have proposed including additional terms in the Taylor rule to take into account money gap[10] or financial conditions: for example, the interest rate might be raised when stock prices, housing prices, or interest rate spreads increase.
Empirical relevance
Although the Federal Reserve does not explicitly follow the Taylor rule, many analysts have argued that the rule provides a fairly accurate summary of US monetary policy under Paul Volcker and Alan Greenspan.[11][12] Similar observations have been made about central banks in other developed economies, both in countries like Canada and New Zealand that have officially adopted inflation targeting rules, and in others like Germany where the Bundesbank‘s policy did not officially target the inflation rate.[13][14] This observation has been cited by Clarida, Galí, and Gertler as a reason why inflation had remained under control and the economy had been relatively stable (the so-called ‘Great Moderation‘) in most developed countries from the 1980s through the 2000s.[11] However, according to Taylor, the rule was not followed in part of the 2000s, possibly leading to the housing bubble.[15][16] Certain research has determined that some households form their expectations about the future path of interest rates, inflation, and unemployment in a way that is consistent with Taylor-type rules.[17]
Criticisms
Athanasios Orphanides (2003) claims that the Taylor rule can misguide policy makers since they face real-time data. He shows that the Taylor rule matches the US funds rate less perfectly when accounting for these informational limitations and that an activist policy following the Taylor rule would have resulted in an inferior macroeconomic performance during the Great Inflation of the seventies.[18]
See also
References
External links
http://en.wikipedia.org/wiki/Taylor_rule
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