EMBARGOED UNTIL TUESDAY, FEBRUARY 16, 216 AT 7:4 P.M. EASTERN TIME OR UPON DELIVERY Prospects for Returning to More Conventional Monetary Policy Eric S. Rosengren President & CEO Federal Reserve Bank of Boston February 16, 216 Colby College Waterville, Maine bostonfed.org
Figure 1: Global Stock Market Indices January 4, 216 - February 12, 216 15 Index, January 4, 216=1 1 95 9 U.K. FTSE 1 85 S&P 5 EURO STOXX 5 Japanese Nikkei 225 8 4-Jan-16 13-Jan-16 22-Jan-16 2-Feb-16 11-Feb-16 Source: FT, S&P, STOXX Limited, WSJ, Haver Analytics
Figure 2: Core Inflation Rates January 212 - December 215 3 Percent Change from Year Earlier 2 1-1 Jan-212 Jan-213 Jan-214 Jan-215 U.S. U.K. Euro Area Japan Note: Core inflation series exclude food and energy for the U.S., the U.K. and the EA. Japan s core inflation series excludes fresh food and is adjusted from April 214 April 215 for a consumption tax increase. Source: BEA, Eurostat, Japan s Ministry of Internal Affairs and Communications, Bank of Japan, Haver Analytics
Figure 3: Brent Crude Oil Price January 26 - January 216 16 Dollars Per Barrel 12 8 4 Jan-26 Jan-28 Jan-21 Jan-212 Jan-214 Jan-216 Recession Source: Energy Information Administration, NBER, Haver Analytics
Figure 4: Non-Energy Commodity Price Index January 26 - January 216 6 Index, January 2, 197=1 5 4 3 2 Jan-26 Jan-28 Jan-21 Jan-212 Jan-214 Jan-216 Recession Note: The S&P Goldman Sachs Commodity Indices track the prices of the nearby futures contracts. Source: S&P, NBER, Haver Analytics
Figure 5: Agricultural Commodity Price Index January 26 - January 216 6 Index, January 2, 197=1 5 4 3 2 Jan-26 Jan-28 Jan-21 Jan-212 Jan-214 Jan-216 Recession Note: The S&P Goldman Sachs Commodity Indices track the prices of the nearby futures contracts. Source: S&P, NBER, Haver Analytics
Figure 6: Nominal Broad Trade-Weighted Exchange Value of the U.S. Dollar January 26 - January 216 14 Index, January 1997=1 12 1 8 Jan-26 Jan-28 Jan-21 Jan-212 Jan-214 Jan-216 Recession Source: Federal Reserve Board, NBER, Haver Analytics
Figure 7: Inflation Expectations June 213 - January 216 5 Percent 4 3 2 1 Median one-year ahead expected inflation rate Median three-year ahead expected inflation rate Jun-213 Dec-213 Jun-214 Dec-214 Jun-215 Dec-215 Source: Survey of Consumer Expectations, 213-215 Federal Reserve Bank of New York (FRBNY). The SCE data are available without charge at www.newyorkfed.org/microeconomics/sceindex/index.html and may be used subject to license terms. FRBNY disclaims any responsibility or legal liability for this analysis and interpretation of Survey of Consumer Expectations data
Figure 8: Core PCE Inflation Projections of Federal Reserve Governors and Federal Reserve Bank Presidents December 212 - December 215 2. Percent Change from Year Earlier 1.8 1.6 1.4 Midpoint of Central Tendency December 215 December 214 1.2 December 213 December 212 1. 1 2 3 Forecast Year Note: Core PCE Inflation is measured by the percent change in the personal consumption expenditures price index excluding food and energy. The central tendency excludes the three highest and three lowest projections in each period. Source: FOMC, Summary of Economic Projections (SEP)
Figure 9: U.S. Inflation Rate: Change in Core Personal Consumption Expenditures Price Index December 212 - December 215 3 Percent Change from Year Earlier 2% Inflation Target 2 1 Dec-212 Dec-213 Dec-214 Dec-215 Source: BEA, Haver Analytics
Figure 1: U.S. Inflation Rate: Change in Personal Consumption Expenditures Price Index by Component 215:Q4 Durable Goods Nondurable Goods Housing and Utilities Health Care Food Services and Accommodations Financial Services and Insurance Other Services 215:Q4-4 -3-2 -1 1 2 3 4 Percent Change from Year Earlier Note: Each component displayed accounts for more than 5 percent of personal consumption expenditures. Source: BEA, Haver Analytics
Figure 11: Average Hourly Earnings and Wages and Salaries of Private Industry Workers 26:Q1-215:Q4 5 Percent Change from Year Earlier 4 3 Average Hourly Earnings of Production and Nonsupervisory Private Industry Workers Employment Cost Index, Wages and Salaries of Private Industry Workers 2 1 26:Q1 29:Q1 212:Q1 215:Q1 Recession Source: BLS, NBER, Haver Analytics
Figure 12: Employment Cost Index for Wages and Salaries for Private Industry Workers by Occupational Group 26:Q1-215:Q4 5 4 3 Percent Change from Year Earlier Production, Transportation and Material Moving Management and Professional Sales and Office 2 Services Occupations 1 26:Q1 29:Q1 212:Q1 215:Q1 Recession Natural Resources, Construction and Maintenance Source: BLS, NBER, Haver Analytics
Figure 13: Real GDP Growth Projections of Federal Reserve Governors and Federal Reserve Bank Presidents, December 16, 215 215:Q4-218:Q4 4 3 Percent Change from Year Earlier Range Median 2 1 215:Q4 216:Q4 217:Q4 218:Q4 Source: FOMC, Summary of Economic Projections (SEP), December 16, 215
Figure 14: Federal Funds Rate Projections of Federal Reserve Governors and Federal Reserve Bank Presidents, December 16, 215 215-218 4 Percent 3 2 1 Range Median Year-end 215 Year-end 216 Year-end 217 Year-end 218 Source: FOMC, Summary of Economic Projections (SEP), December 16, 215