Fomc 20010131 Material

1/30-31/01 193

APPENDIX 1 Charts used by Mr. Fisher.

0.0

0.2

0.4

0.6

0.8

11/1 11/15 11/29 12/13 12/27 1/10 1/24

4.0

4.4

4.8

5.2

5.6

6.0

6.4

6.8

7.2

11/1 11/15 11/29 12/13 12/27 1/10 1/244.0

4.4

4.8

5.2

5.6

6.0

6.4

6.8

7.2Percent

United States

Japan

3-Month Deposit RatesNovember 1, 2000 - January 26, 2001

Current Deposit Rate and Rates Implied by Traded Forward Rate Agreements

Euro-areaJapan

LIBOR Fixing 3-Mo. Forward 9-Mo. ForwardUnited States

Page 1

FOMC 11/15

FOMC 11/15

Euro-area

U.S. Oct.Dur. GoodsOrders Data-5.5% 11/28

Tankan Survey 12/13

Source: Reuters, Bloomberg

FOMC12/19

FOMC 12/19 FOMC 1/3-50bp

Percent

Phil. FedSurvey 1/18

-200

-150

-100

-50

0

50

100

150

6/1 7/1 8/1 9/1 10/1 11/1 12/1 1/1-200

-150

-100

-50

0

50

100

150

2-Year Government Yields minus Central Bank Policy RatesJune 1, 2000 - January 26, 2001Basis Points Basis Points

Page 2

Sources: Bloomberg

Japan

Germany

U.K.

U.S.Canada

2-Year Swap Rates minus Central Bank Policy RatesJune 1, 2000 - January 26, 2001Basis Points Basis Points

-120

-80

-40

0

40

80

120

160

6/1 7/1 8/1 9/1 10/1 11/1 12/1 1/1-120

-80

-40

0

40

80

120

160

U.K.

U.S.

Euro-Area

Japan

Canada

Policy Rates:US: Federal Funds Rate (O/N), Euro area: Main refinancing rate (2-week), Japan:Overnight Call Rate, U.K.: Base Rate (O/N repo), Canada: Overnight Target(midpoint of bank rate and discount rate)

20

50

80

110

140

170

11/1 11/15 11/29 12/13 12/27 1/10 1/2420

50

80

110

140

170

Basis Points

Percent Changefrom 11/1/00

G-3 Trade-Weighted CurrenciesNovember 1, 2000 - January 26, 2001

-15

-10

-5

0

5

10

11/1 11/15 11/29 12/13 12/27 1/10 1/24-15

-10

-5

0

5

10

Percent Change from 11/1/00

2-Year Differential

10-Year Differential

Yen

Dollar

U.S. and European Swap Differentials(U.S. rate minus European rate)November 1, 2000 - January 26, 2001

Euro

Page 3

FOMC 11/15

FOMC 11/15

Basis Points

Source: Bloomberg

FOMC 12/19

FOMC 12/19

FOMC 1/3

FOMC 1/3

Source: Bank of England, Bloomberg

Yield Curves

December 19, 2000Percent Percent Percent Percent

4.50

5.50

6.50

7.50

8.50

9.50

10.50

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 304.50

5.50

6.50

7.50

8.50

9.50

10.50

4.50

5.50

6.50

7.50

8.50

9.50

10.50

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 304.50

5.50

6.50

7.50

8.50

9.50

10.50

FF Target

FF Target

Swap Rates

A2 Industrial Corporates

Swap Rates


Treasury

4.50

5.50

6.50

7.50

8.50

9.50

10.50

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 304.50

5.50

6.50

7.50

8.50

9.50

10.50January 3, 2001

FF Target

Swap Rates


Treasury Treasury

4.50

5.50

6.50

7.50

8.50

9.50

10.50

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 304.50

5.50

6.50

7.50

8.50

9.50

10.50November 15, 2000

FF Target

Swap Rates


Treasury

BB1Industrial Corporates BB1 Industrial Corporates

BB1 Industrial Corporates BB1 Industrial Corporates

Page 4

Sources: A2 Industrial Corporates: Bloomberg Industrial Corporate A2 Index BB1 Industrial Corporates: Bloomberg Industrial Corporate 2B1 Index Swap Rates: Bloomberg Treasury: FRBNY Price Data

January 26, 2001

Commercial Paper (A2/P2 - A1/P1) Spreads and Yields

September through February, 1996 - 2001

30-Day Yields 90-Day Yields

90-day Spreads

0

20

40

60

80

100

120

9/1 9/15 9/29 10/1310/2711/1011/24 12/8 12/22 1/5 1/19 2/2 2/160

20

40

60

80

100

1201996-19971997-19981998-19991999-2000Series72000-2001

YearEnd

30-day Spreads

0

20

40

60

80

100

120

9/1 9/15 9/29 10/1310/2711/1011/24 12/8 12/22 1/5 1/19 2/2 2/160

20

40

60

80

100

1201996-19971997-19981998-19991999-20002000-2001

YearEnd

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

9/1 9/15 9/29 10/13 10/27 11/10 11/24 12/8 12/22 1/5 1/19 2/2 2/164.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0A2/P2

A1/P1

YearEnd

1/3/01-50 bps(6.00%)

(bps)

(%) (%) (%) (%)

(bps)

Page 54.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

9/1 9/15 9/29 10/1310/2711/1011/24 12/8 12/22 1/5 1/19 2/2 2/164.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0A2/P2A1/P1

YearEnd

1/3/01-50 bps(6.00%)

(bps) (bps)

2000 - 01 2000- 01

Source: Bloomberg compiled index Year 2001 Data as of January 26

-45000

-40000

-35000

-30000

-25000

-20000

-15000

-10000

-5000

0

-45000

-40000

-35000

-30000

-25000

-20000

-15000

-10000

-5000

0Millions of dollars

Year End

Key: Lines with circles show actual; lines without circles show projected; dottedline shows projected change in autonomous factors, projections as of Dec. 13

Cumulative changes in net autonomous factors and redemptions from Oct. 3

4-Oct 18-Oct 1-Nov 15-Nov 29-Nov 13-Dec 27-Dec 10-Jan 24-Jan 7-Feb

FOMC 12/19

Cumulativeredemptionssince Oct. 3

Impact of changes in autonomousfactors, including currency, Treasurybalances, float and the foreign RP pool.

Projectionsas of Dec. 13

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

55000

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

55000Millions of dollars

Year End

Key: Lines with circles show actual; lines without circles show projected

Actual and projected open market operations from Oct. 3

4-Oct 18-Oct 1-Nov 15-Nov 29-Nov 13-Dec 27-Dec 10-Jan 24-Jan 7-Feb

$21 bn

$23.0 bn

FOMC 12/19

Other RPs (less MPSs).

$12.0 bnLevel of 28-day RPsoutstanding

Cumulat ive outrightpurchases since Oct. 3

Page 6

Extended Reserve OutlookImpact of Changes in Factors, Redemptions, and RPs on Reserves

from maintenance period ended January 24 to period ended June 27

net impact of forecast Factors movements -$6 billion

impact of anticipated Redemptions -$10 billion

Total impact of factors and redemptions -$16 billion

Level of RPs in January 24 period long-term RPs $19 billion short-term RPs $4 billion

Case A:impact of reducing long-term RPs to zero -$19 billion

total decline in reserves from RPs, factors, redemptions -$35 billion

Case B:impact of reducing long-term RPs to $10 billion -$9 billion

total decline in reserves from RPs, factors, redemptions -$25 billion

Notes: movements in factors also include impact of changes in requirements on reserveneeds in addition to changes in operating factors such as currency and Treasury balance.

1/30-31/01 194

APPENDIX 2

“Staff Presentation on the Economic Outlook.”

STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC

Material for

Staff Presentation on the Economic Outlook

January 30, 2001

2000 2001 2002

H1 H2

1. Real GDP 3.7 .4 3.1 3.8

2. Private domestic final purchases 5.1 1.4 2.6 3.7

3. PCE 4.5 1.2 2.0 2.8

4. Equipment and software 10.3 1.2 6.3 10.9

Memo:

Contribution of inventory investment5. (percentage points) .0 –1.3 .3 .2

1997 1998 1999 2000 2001 20023.5

4

4.5

5

5.5

6

6.5

Forecast Summary

Chart 1

Unemployment RatePercent

1997 1998 1999 2000 2001 20020

0.5

1

1.5

2

2.5

3

PCE PricesPercent change, Q4/Q4

Growth in Real GDP and Selected ComponentsPercent change, AR*

*Years are Q4/Q4; half years are Q2/Q4 or Q4/Q2.

Other factors:

� Stock market falls in the near term, and then is flat through the end of the projectionperiod. This implies a falling wealth-income ratio.

� Long-term corporate interest rates remain near current levels throughout theprojection period. Consequently, risk spreads on corporate bonds will remainelevated.

� The foreign exchange value of the dollar declines moderately in real terms overthe projection period.

� Fiscal policy will be stimulative next year. We assume a package of tax cuts worth$50 billion in the next fiscal year as well as further increases in discretionary spending.

� Prices of oil and natural gas are expected to recede over the next two years, consistentwith quotes in futures markets.

1998 1999 2000 2001 20024.5

4.75

5

5.25

5.5

5.75

6

6.25

6.5

6.75

7

Key Background Factors

Chart 2

Federal Funds RatePercent

Nominal

1989 1991 1993 1995 1997 1999 2001200

300

400

500

600

Selected High Frequency Activity Indicators

Chart 3

Initial claims for Unemployment InsuranceThousands

Four-week moving average

1989 1991 1993 1995 1997 1999 20010

50

100

150

200

Michigan Index of Consumer SentimentIndex

Expected conditions index(Feb. 1966=100)

1989 1991 1993 1995 1997 1999 200120

30

40

50

60

New OrdersBillions of dollars

Nondefense capital goods,excl. aircraft

Three-month moving average

1989 1991 1993 1995 1997 1999 2001100

150

200

250

New OrdersBillions of dollars

Consumer durable goods

Three-month moving average

1989 1991 1993 1995 1997 1999 2001400

800

1200

1600

Building Permits*Thousands of units

*Adjusted for non-permit issuing places.

Single-family homes

1989 1991 1993 1995 1997 199920

30

40

50

60

70

80

IP Diffusion IndexIndex

Three-month

2000 2001

Q4 Q1 Q2 H2

1. Real GDP 2.0 –.5 1.3 3.1

Contribution of:

2. Manuf. sector –.5 –1.7 .2 .8

3. Other 2.5 1.2 1.1 2.3

1990 1992 1994 1996 1998 200050

60

70

80

90

Inventories and Production

Chart 4

Days’ Supply of Light Motor VehiclesDays

1990 1992 1994 1996 1998 200040

80

120

160

200

Motor VehiclesIP index

1990 1992 1994 1996 1998 20001.3

1.4

1.5

1.6

1.7

1.8

1.9

Manufacturing Excl. MV and High TechInventory-shipments ratio

1990 1992 1994 1996 1998 200080

90

100

110

120

130

Manufacturing Excl. MV and High TechIP index

Real GDPPercent change, AR

Final sales

Inventories

2000 2001 20020

2

4

6

8

Final Sales and InventoriesPercent change, AR

1999 2000 2001 20020

1

2

3

4

5

The Longer-Run Fundamentals

Chart 5

Real Personal Income GrowthPercent change, Q4/Q4

1990 1994 1998 200260

70

80

90

100

User Cost of CapitalIndex

(1989:Q1 = 100)

1990 1994 199820

40

60

80

100

Share of Banking Industry Assets atPercentWell-Capitalized Banks

2000 2001 20020.8

0.6

0.4

0.2

0–

+

0.2

0.4

Direct Effects of Oil and Natural Gas PricePercentage points

*Relative to unchanged energy prices after 1999:Q4.

Changes on PCE Growth*

1999 2000 2001 20021

0.5

0–

+

0.5

1

1.5

Effects of Changes in the Real Funds RatePercentage points

*Relative to unchanged real funds rate after 1998:Q3.

on GDP Growth*

1999 2000 2001 20020

0.2

0.4

0.6

0.8

Fiscal Impetus*Percent of GDP

*Fiscal Impetus is an indicator of the change indiscretionary fiscal policy.

1973–95 1996–99 2000 2001 2002

1. Potential GDP 2.9 3.9 4.4 4.2 4.1

2. Labor input 1.6 1.2 1.1 1.1 1.1

3. Labor productivity 1.4 2.7 3.3 3.1 3.0

4. Capital deepening .7 1.2 1.5 1.3 1.2

5. Labor quality .3 .3 .3 .3 .3

6. Multifactor productivity .4 1.2 1.5 1.5 1.5

1999 4.1

2000 3.5

2001 H1 .7

H2 3.1

2002 3.1

1998 1999 2000 2001 20023

0–

+

3

6

9

Labor Productivity

Chart 6

Nonfarm Business OutputFour-quarter percent change

Productivity

Hours

1975 1984 1993 20020

2

4

6

8

Capital ServicesPercent change, Q4/Q4

1975 1980 1985 1990 1995 20000

0.4

0.8

1.2

1.6

Structural Multifactor ProductivityPercent change, Q4/Q4

1900-2000 annual average

Supply-Side Components of Potential GDPPercent change, Q4/Q4

NFB Productivity

*Years are Q4/Q4; half years

Percent change, AR*

are Q2/Q4 or Q4/Q2.

Q4

1999 4.1

2000 4.0

2001 5.2

2002 5.5

Percent change, Q4/Q4

Actual Trend

1999 .8 1.5

2000 2.0 2.3

2001 3.4 2.2

2002 1.9 2.0

1994 1995 1996 1997 1998 1999 2000 2001 20027000

8000

9000

10000

11000

Inflation Indicators

Chart 7

GDP GapBillions of chained (1996) dollars, ratio scale

Actual

Potential

1997 1998 1999 20002

2.5

3

3.5

Inflation ExpectationsPercent

Michigan SRCOne-year ahead, median

FRB PhiladelphiaOne-year ahead

1990 1993 1996 1999 20020

2

4

6

8

Labor CompensationFour-quarter percent change

NFB compensation per hour

Employment cost index


Unit Labor Costs*

*Nonfarm business sector.

2

1

0–

+

1

2

3

4

5


0123456 1 2 3 4 5 6

Current episode

Forecast

Maximum

Minimum

- quarters +

Percent change, Q4/Q4

Total Total

PCE CPI

1999 2.0 2.6

2000 2.3 3.4

2001 1.8 2.3

2002 1.7 2.0

Direct

Indirect

1998 1999 2000 2001 20020.5

0–

+

0.5

1

Inflation Projection

Chart 8

Energy EffectsQ4/Q4 contribution to PCE inflation

1995 1996 1997 1998 1999 2000 2001 20020.5

1

1.5

2

2.5

3

PCE PricesFour-quarter percent change

Core PCE

Core PCE market prices

1998 1999 2000 2001 20024

2

0–

+

2

4

PPI Intermediate excl. Food and EnergyFour-quarter percent change

PPI intermediateexcl. food and energy

(right scale)

1998 1999 2000 2001 200230

0–

+

30

60

PCE Petroleum ProductsFour-quarter percent change

Gasoline

Heating Fuel

1998 1999 2000 2001 200230

0–

+

30

60

PCE Service FuelsFour-quarter percent change

Natural gas

Electricity

1998 1999 2000 2001 200276

78

80

82

84

Manufacturing CU(left scale)

1992 1994 1996 1998 2000 200230

20

10

0–

+

10

Productivity Risks

Chart 9

E&S Computer PricesFour-quarter percent change

1992 1994 1996 1998 200010

12

14

16

Long-term Earnings ExpectationsPercent change, AR

Source: IBES.

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 20000.12

0.15

0.18

0.21

0.24

Average Return to CapitalPercent

1994 1996 1998 2000 2002 200428

32

36

40

44

Structural Labor ProductivityDollars per hour, ratio scale

Baseline

Alternative

The "S-curve"

Greenbook baseline Constant real funds rate Taylor Rule policy

1999 2001 2003 20056000

9000

12000

15000

18000

21000

A Productivity Disappointment

Chart 10

Stock MarketWilshire 5000 Level


1999 2001 2003 20050

2

4

6

8

10

Real GDPFour-quarter percent change


1999 2001 2003 20053

4

5

6

7

8

9

10



1999 2001 2003 20051

1.5

2

2.5

3

Core PCEFour-quarter percent change


1999 2001 2003 20054

6

8

10

12

Profit sharePercent of GDP


1999 2001 2003 20054.5

5

5.5

6

6.5

7

7.5

8

Nominal Federal Funds RatePercent

Chart 11

Exchange Rates and Interest Rates

1999 200085

95

105

115

125

135

145

*Trade weighted-average dollar against major international currencies.

Major*

Euro

Japanese yen

2001

Nominal Exchange Rates Foreign currency per U.S. dollar Jan. 1999 = 100

1999 200090

110

130

150

170

S&P 500

TOPIX

DJ Euro

2001

Stock PricesJan. 1999 = 100

4.0

4.5

5.0

5.5

6.0

6.5

2000 2001 2002

Interest Rate Futures

January 29, 2001

June 27, 2000

Euro AreaPercent

0.0

0.5

1.0

1.5

2.0

2.5

2000 2001 2002

January 29, 2001

June 27, 2000

JapanPercent

4.5

5.0

5.5

6.0

6.5

7.0

2000 2001 2002

January 29, 2001

June 27, 2000

United StatesPercent

Interest Rates

ChangeLevel 6/27/00

1/29/01 to 1/29/01

Three-Month 1. Euro 4.79 0.23 2. Japan 0.42 0.34 3. United States 5.46 -1.28

Ten-Year 1. Germany 4.84 -0.41 2. Japan 1.45 -0.29 3. United States 5.30 -0.80

Chart 12

Financial Indicators: Emerging Market Countries

1999 200080

90

100

110

120

130

(Weekly data)Asia

Korean won

Indonesian rupiah

Thai baht

2001


1999 200080

100

120

140

160

180

Latin America

Mexican peso

Brazilian real

Argentine peso

2001


1999 200060

100

140

180

220

260

300

340

Korea

China*

Indonesia

2001 *Shanghai B-share (foreigners only) stock price index.

Stock IndexesJan. 1999 = 100

1999 200060

100

140

180

220

260

300

340

Mexico

Brazil

Argentina

2001

Stock IndexesJan. 1999 = 100

Interest Rates and Spreads

* One-week maturity.

ChangeLevel 6/27/00

1/29/01 to 1/29/01

One-Month Domestic 1. Korea* 5.50 -0.50 2. Thailand 3.00 -0.50 3. Indonesia 14.91 3.08

Offshore-Dollar Bond Spreads 4. Korea 2.23 0.23 5. Indonesia 7.41 1.08 6. China 1.31 -0.05

Interest Rates and Spreads

ChangeLevel 6/27/00

1/29/01 to 1/29/01

One-Month Domestic 1. Mexico 17.75 0.75 2. Brazil 14.85 -3.40 3. Argentina 7.75 0.00

Brady Bond Yield Spreads 4. Mexico 3.98 -1.01 5. Brazil 8.15 -0.70 6. Argentina 8.73 -0.21

Chart 13

Summary of Foreign Outlook

2000 2001 20020

1

2

3

4

5

6

7

8

*Years are Q4/Q4; half years are Q2/Q4 or Q4/Q2.

H1

H2

U.S.Total foreign

Real GDP GrowthPercent change, SAAR*

2000 2001 20020

1

2

3

4

5

6

7

8

*U.S. nonagricultural export weights.

Industrial countriesAsiaLatin America

Foreign Real GDP*Percent change, Q4/Q4

1999 200090

100

110

120

130

140

150

160

TaiwanKoreaMalaysiaThailand

ExportsJan. 1999 = 100

0

4

8

12

16

Source: Argentine Ministry of Economy; Deutsche Bank. *2000 quarterly average.

2000 2001 Q1 Q2 Q3 Q4

$6.3*

$10.0

$6.6 $5.8

$4.9

Short term debtAmortization - PrivateFiscal Deficit

otherAmortization - IFI

Argentina: Financing Requirements$ billions

Real GDP GrowthPercent, SAAR*

*Years are Q4/Q4; half years are Q2/Q4 or Q4/Q2.**U.S. nonagricultural export weights.

2000 2001 2002 H1 H2

1. Developing Asia** 8.5 3.7 4.5 5.2

of which:

2. China 5.6 9.2 7.4 7.7

3. Korea 5.9 5.7 3.0 4.7

4. Malaysia 11.2 0.6 5.3 5.1

5. Thailand 4.3 -0.4 6.0 5.0

Real GDP Growth Percent, SAAR*

*Years are Q4/Q4; half years are Q2/Q4 or Q4/Q2.**U.S. nonagricultural export weights.

2000 2001 2002 H1 H2

1. Latin America** 7.7 4.4 3.8 4.4

of which:

2. Mexico 9.2 5.1 4.0 4.7

3. Brazil 3.9 3.9 3.3 4.0

4. Argentina -1.6 -3.5 1.9 3.3

Chart 14

Industrial Country Outlook

1999 200095

100

105

110

115

120

20

40

60

80

100

Euro Area

Canada

Japan

GDP Leading Indicators Jan. 1999 = 100 Diffusion index, percent

1999 2000-40

-30

-20

-10

0

10

20

120

130

140

150

160

170

Euro Area

Canada

Japan

Business Confidence Percent balance 1977Q1 = 100

1999 200098

100

102

104

106

France

Canada

Germany

Japan

EmploymentJan. 1999 = 100

-2

-1

0

1

2

3

1999 2000 2001 2002*Change in the structural deficit.

Euro AreaJapanCanada

Fiscal Impulse*Percent of GDP

-2

-1

0

1

2

3

4

1999 2000 2001 2002

Euro Area

Canada

Japan

CPI Inflation4-quarter percent change

Real GDP GrowthPercent change, SAAR*

*Years are Q4/Q4; half years are either Q2/Q4 or Q4/Q2.**U.S. nonagricultural export weights.

2000 2001 2002H1 H2

1. Indust. countries** 4.5 2.6 2.4 3.0

2. Euro Area 3.4 2.2 2.8 3.0

3. Japan 5.4 -1.2 0.9 1.2

4. Canada 5.0 3.9 2.3 3.4

5. United Kingdom 2.9 3.0 2.5 2.5

Chart 15

External Outlook

1998 1999 2000 2001 20025

10

15

20

25

30

35

Current WTI

June Greenbook WTI

Oil PricesDollars per barrel

1998 1999 2000 2001 200295

100

105

110

Broad dollar

Real Exchange Rate1998Q1 = 100

1998 1999 2000 2001 2002-12

-8

-4

0

4

8

*Excludes computers, semiconductors, and oil.

Total

Core goods*

U.S. Import PricesPercent change, SAAR

*Excludes computers, semiconductors, and agriculture.

1999 2000 2001 2002

Growth of real exports1. G & S 4.3 7.2 6.0 9.9

Percentage point contribution2. Services 0.1 0.4 1.2 1.93. Goods 4.2 6.8 4.8 8.0 of which:4. Core* 2.3 4.0 2.7 3.9

Real Export GrowthPercent change, Q4/Q4

*Excludes computers, semiconductors, and oil.

1999 2000 2001 2002

Growth of real imports1. G & S 12.0 11.4 4.1 8.2

Percentage point contribution2. Services 0.4 1.9 0.2 0.83. Goods 11.6 9.5 3.9 7.4 of which:4. Core* 9.5 7.0 1.8 4.1

Real Import GrowthPercent change, Q4/Q4

1999 2000 2001 2002-2

-1

0

1

2

ExportsImports

Contribution to U.S. Real GDP GrowthPercentage points, Q4/Q4

Chart 16

ECONOMIC PROJECTIONS FOR 2001

FOMC

Range CentralTendency

Staff

-------------Percentage change, Q4 to Q4------------

Nominal GDP July 2000

Real GDP July 2000

PCE Prices July 2000

3½ to 5¼ (5 to 6¼)

2 to 3¼(2½ to 4)

1¾ to 2½(1¾ to 3)

4 to 5(5½ to 6)

2 to 2½(3¼ to 3¾)

1¾ to 2¼(2 to 2½)

3.8

1.8

1.8

--------------Average level, Q4, percent---------------

Unemployment rate July 2000

4¼ to 5(4 to 4½)

About 4½(4 to 4¼)

5.2

Central tendencies calculated by dropping high and low three from ranges.

1/30-31/01 195

APPENDIX 3

“Material for Staff Presentation on Monetary Policy Alternatives.”

STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC

Material for

Staff Presentation on Monetary Policy Alternatives January 31, 2001

Chart 4Alternative Supply-Side Scenarios

1

4.0

4.5

5.0

5.5

6.0

6.5

7.0

2000 2001 2002 2003 2004 20054.0

4.5

5.0

5.5

6.0

6.5

7.0

Nominal Federal Funds Rate

Percent Percent

Baseline (chart 1)4 Percent NAIRUProductivity Slowdown

2.5

3.0

3.5

4.0

4.5

5.0

5.5

2000 2001 2002 2003 2004 20052.5

3.0

3.5

4.0

4.5

5.0

5.5

Real Federal Funds Rate

Percent Percent


0.5

1.0

1.5

2.0

2.5

2000 2001 2002 2003 2004 20050.5

1.0

1.5

2.0

2.5

PCE Inflation (ex. food and energy)(Four-quarter percent change)

Percent Percent


3

4

5

6

7

2000 2001 2002 2003 2004 20053

4

5

6

7

Civilian Unemployment Rate

Percent Percent


1. The real federal funds rate is calculated as the quarterly nominal funds rate minusthe four-quarter percent change in the PCE chain-weight price index excluding food and energy.

Chart 5Alternative Demand-Side Scenarios

1

4.0

4.5

5.0

5.5

6.0

6.5

7.0

2000 2001 2002 2003 2004 20054.0

4.5

5.0

5.5

6.0

6.5

7.0

Nominal Federal Funds Rate

Percent PercentBaseline (chart 1)RecessionGrowth Pause

2.5

3.0

3.5

4.0

4.5

5.0

5.5

2000 2001 2002 2003 2004 20052.5

3.0

3.5

4.0

4.5

5.0

5.5

Real Federal Funds Rate

Percent Percent

Baseline (chart 1)RecessionGrowth Pause

0.5

1.0

1.5

2.0

2.5

2000 2001 2002 2003 2004 20050.5

1.0

1.5

2.0

2.5

PCE Inflation (ex. food and energy)(Four-quarter percent change)

Percent Percent


3

4

5

6

7

2000 2001 2002 2003 2004 20053

4

5

6

7

Civilian Unemployment Rate

Percent Percent


1. The real federal funds rate is calculated as the quarterly nominal funds rate minusthe four-quarter percent change in the PCE chain-weight price index excluding food and energy.

Fomc 20010131 Material

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