Monetary, Fiscal, and Financial Stability Policy Tools: Are We Equipped for the Next Recession?

Transcription

1 EMBARGOED UNTIL FRIDAY, MARCH 23, 218 AT 7: P.M.; OR UPON DELIVERY Monetary, Fiscal, and Financial Stability Policy Tools: Are We Equipped for the Next Recession? Eric S. Rosengren President & CEO Federal Reserve Bank of Boston March 23, th Conference of the International Research Forum on Monetary Policy Washington, DC bostonfed.org

2 Figure 1: Mentions of Financial Instability in FOMC Meetings and Periods of Instability February 11, December 15, Number of Mentions Black Monday Bank of New England Asian Crisis Russian Crisis/ LTCM Argentine Debt Default Bear Stearns 12 Special Session on Housing Lehman 8 11-Feb-87 6-Feb-91 1-Feb-95 3-Feb Jan-3 31-Jan-7 Recession FOMC Meeting Date Source: Peek, Rosengren and Tootell. (216) Does Fed Policy Reveal a Ternary Mandate? Federal Reserve Bank of Boston Working Paper 16-11

3 Figure 2: Federal Funds Rate January December Black Monday Bank of New England Asian Crisis Russian Crisis/ LTCM Argentine Debt Default Bear Stearns 9 Lehman 6 3 Jan-1987 Jan-1992 Jan-1997 Jan-22 Jan-27 Recession Month Source: Federal Reserve Board, NBER, Haver Analytics

4 Figure 3: Forecasts for the Longer-Run Federal Funds Rate from the Summary of Economic Projections January March Central Tendency Median Federal Funds Target Rate 2 Jan-212 Dec-212 Dec-213 Dec-21 Dec-215 Dec-216 Dec-217 Date of Forecast Note: The central tendency excludes the three highest and three lowest observations. Source: FOMC, Summary of Economic Projections (SEP)

5 Figure : Federal Funds Rate, Noting Peaks and Troughs January February Jan-196 Jan-197 Jan-198 Jan-199 Jan-2 Jan-21 Recession Source: Federal Reserve Board, NBER, Haver Analytics

6 Figure 5: Federal Government Surplus or Deficit as a age of GDP 1987:Q1-28:Q Black Monday Bank of New England Asian Crisis Argentine Debt Default Bear Stearns Lehman Russian Crisis/ LTCM :Q1 1992:Q1 1997:Q1 22:Q1 27:Q1 Recession Quarter Note: Figures are four-quarter moving averages. Source: BEA, U.S. Treasury, NBER, Haver Analytics

7 Figure 6: General Government Gross Debt as a age of GDP United States France United Kingdom Germany Note: Actual are through 217 for the U.S. and 216 for all other countries. CBO projections for the U.S. ( ) do not include the recent tax changes and increases in the federal budget. Source: OMB (U.S.), CBO (U.S.), IMF (France, Germany, U.K.), Haver Analytics

8 Figure 7: Unemployment Rates and Stress Tests: Actual and Severely Adverse Scenario Peak age Points 12 6 Scenario Peak minus Actual Scenario Peak 2 2 Actual at Time of Scenario Development Year of Stress Test Year of Stress Test Note: There was no stress test in 21. Source: Federal Reserve Board

9 Figure 8: Countercyclical Capital Buffers by Jurisdiction June January Hong Kong Norway Sweden Czech Republic Iceland Slovakia U.K. Lithuania. Jun-215 Jun-216 Jun-217 Jun-218 Note: Based on implementation date, which is generally twelve months after announcement. The U.K. initially announced a CCyB of.5% in March 216, with an implementation date of March 217, however in July 216 the CCyB was lowered to %. Source: European Systemic Risk Board, Bank of England, Hong Kong Monetary Authority

10 Figure 9: Capitalization Rates by Property Type 21:Q1-217:Q Industrial Office Retail Apartment :Q1 2:Q1 27:Q1 21:Q1 213:Q1 216:Q1 Recession Note: The capitalization or cap rate is the ratio of net operating income produced by a property to the price paid, calculated at the time of a transaction. Based on properties of $2.5 million or more. Source: Real Capital Analytics, NBER, Haver Analytics

11 Figure 1: Real Commercial Property Price Indices by Property Type 2:Q - 217:Q 1 Index, Previous Peak= Apartment Industrial Office Retail 2:Q 25:Q 21:Q 215:Q Recession Note: Indices are adjusted for inflation using the GDP deflator. Indices are repeat-sales based and include properties of $2.5 million or more. Source: Real Capital Analytics, BEA, NBER, Haver Analytics

12 Figure 11: Distribution of S&P 5 Composite Price to Earnings Ratios June and December, Number of Observations P/E Ratio, December Note: Excludes 2 outliers -- Dec 28 (6.7) and Jun 29 (122.) Source: S&P, Haver Analytics

13 Figure 12: Distribution of Shiller Cyclically-Adjusted S&P 5 Composite Price to Earnings Ratios June and December, Number of Observations P/E Ratio, December Source: Robert Shiller, Haver Analytics