September 2, 26 Authorized for Public Release 119 of 132 Appendix 1: Materials used by Mr. Kos
September 2, 26 Authorized for Public Release 12 of 132 Class II Restricted FR 6. 5.75 5.5 5.25 5..75.5.25 $ 1/ 31/ 6: +25 Bps Current U.S. 3-Month Deposit Rates and Rates Implied by Traded Forward Rate Agreements January 2, 26 September 18, 26 Libor Fixing 3M Forward 6M Forward 9M Forward 3/28/6: +25 Bps 5/1/6: +25 Bps 6/29/6: +25 Bps 8/8/6: Jan-6 Feb-6 Mar-6 Apr-6 May-6 Jun-6 Jul-6 Aug-6 Sep-6 Page 1 of 6. 5.75 5.5 5.25 5..75.5.25 5.5 5.25 5..75.5 2- and 1-Year Treasury Yields and Target Fed Funds Rate January 2, 26 September 18, 26 Target Fed Funds 1-Year Yield 2-Year Yield 5.5 5.25 5..75.5.25. 8/8/6: Jan-6 Feb-6 Mar-6 Apr-6 May-6 Jun-6 Jul-6 Aug-6 Sep-6.25. 2.8 2.7 2.6 2.5 2. 1Y Breakeven Rate U.S. Breakeven Inflation Rates January 2, 26 September 18, 26 5Y-5Y Forward Breakeven Rate 2.8 2.7 2.6 2.5 2. 2.3 Jan-6 Feb-6 Mar-6 Apr-6 May-6 Jun-6 Jul-6 Aug-6 Sep-6 2.3
September 2, 26 Authorized for Public Release 121 of 132 Class II Restricted FR Basis Points 1 75 December 26-27 Interest Rate Future Spreads January 2, 26 September 18, 26 Euroyen Page 2 of Basis Points 1 75 5 25 Euribor Sterling 5 25-25 Eurodollar -25-5 Canadian BA -5-75 Jan-6 Feb-6 Mar-6 Apr-6 May-6 Jun-6 Jul-6 Aug-6 Sep-6 5.5 5..5. 3.5 Global 1-Year Yields January 2, 26 September 18, 26 U.S. U.K. Canada France Global Breakeven Inflation Rates January 2, 26 September 18, 26 U.K. 1Y Canada 15Y U.S. 1Y France 1Y -75 3.5 3. 2.5 2. 3. 1/1 2/1 3/1 /1 5/1 6/1 7/1 8/1 9/1 2.2 Japanese 1-Year Yield January 2, 26 September 18, 26 1/1 2/1 3/1 /1 5/1 6/1 7/1 8/1 9/1 Japanese 1-Year Breakeven Inflation Rate January 2, 26 September 18, 26 1.5 1.2 2. 1.8 1.6 1..8 1. 1.2 3/9/6: BoJ QEP End 7/1/6: BoJ + 25 Bps 8/2/6: CPI Revisions 1/1 2/1 3/1 /1 5/1 6/1 7/1 8/1 9/1 3/9/6: BoJ QEP End 7/1/6: BoJ + 25 Bps 8/2/6: CPI Revisions 1/1 2/1 3/1 /1 5/1 6/1 7/1 8/1 9/1.6.
September 2, 26 Authorized for Public Release 122 of 132 Class II Restricted FR 2.5 Japanese Sovereign Yield Curve Page 3 of 2.5 2. 1.5 1. 8/8/26 9/18/26 2. 1.5 1..5.5. Index 17 16 15 1 13 12 11 1 9 8 1 Year 2 Year 5 Year 1 Year 3 Year Index: 3/1/1973=1 Source: Bank of Japan Real Effective Yen Exchange Rate March 1973 August 26 1973 1976 1979 1982 1985 1988 1991 199 1997 2 23 26. Index 17 16 15 1 13 12 11 1 9 8 Index 21 2 19 18 17 16 15 1 13 12 11 1 9 Select Metals Prices January 2, 26 September 18, 26 Index: 1/2/6 = 1 Platinum Copper Silver Gold Zinc 1/1 2/1 3/1 /1 5/1 6/1 7/1 8/1 9/1 Front Month Energy Futures Prices January 2, 26 September 18, 26 Index: 1/2/6 = 1 Crude Oil Gasoline Heating Oil Natural Gas 1/1 2/1 3/1 /1 5/1 6/1 7/1 8/1 9/1 Index 15 1 13 12 11 1 9 8 7 6 5 3
September 2, 26 Authorized for Public Release 123 of 132 Class II Restricted FR $ Billions 11, 1, 9, 8, 7, 6, 5, Early and Regular Return Fed Funds Volumes Regular Return (LHS) Early Return (LHS) % Early Return (RHS) Page of of Total 18% 15% 12% 9% 6% 3% % 8/8/26 8/1/26 8/1/26 8/16/26 8/18/26 8/22/26 8/2/26 8/28/26 8/3/26 9/1/26 9/6/26 9/8/26 9/12/26 9/1/26 9/18/26 5.31 5.3 5.29 5.28 5.27 5.26 5.25 5.2 5.23 5.22 5.21 5.2 5.19 5.18 9 a.m. Brokered Overnight Fed Funds Rate vs. Early Return Fed Funds Effective Rate Target Rate 9am FF Rate Early Return Effective Rate 8/8/26 8/11/26 8/16/26 8/21/26 8/2/26 8/29/26 9/1/26 9/7/26 9/12/26 9/15/26 5.31 5.3 5.29 5.28 5.27 5.26 5.25 5.2 5.23 5.22 5.21 5.2 5.19 5.18.2.18.16.1.12.1.8.6..2. Intraday Standard Deviation for Early Return, Regular Return, and All Fed Funds Transactions Early Return Regular Return.2.18.16.1.12.1.8.6..2. 8/8/26 8/1/26 8/1/26 8/16/26 8/18/26 8/22/26 8/2/26 8/28/26 8/3/26 9/1/26 9/6/26 9/8/26 9/12/26 9/1/26 9/18/26 *Large Principal & Interest Payment Dates for the GSEs: 8/15/6, 8/25/6, 9/15/6
September 2, 26 Authorized for Public Release 12 of 132 Appendix 2: Materials used by Mr. Bernanke
September 2, 26 Authorized for Public Release 125 of 132 CLASS II - RESTRICTED (FR) Page 1 of 1 Unemployment Rate age point change from four quarters earlier 26:Q2 3 3 2 2 1.3 percentage point 1-1 -1-2 -2-3 -3-195 1955 196 1965 197 1975 198 1985 199 1995 2 25 - Real GDP 1 12 change from four quarters earlier 1 26:Q2 12 1 1 8 8 6 6 2 2-2 2 percent -2-195 1955 196 1965 197 1975 198 1985 199 1995 2 25 -
September 2, 26 Authorized for Public Release 126 of 132 Appendix 3: Materials used by Mr. Reinhart
September 2, 26 Authorized for Public Release 127 of 132 Class I Restricted Controlled FR Material for Briefing on Monetary Policy Alternatives Vincent R. Reinhart September 2, 26
September 2, 26 Authorized for Public Release 128 of 132 Exhibit 1 Financial Market Developments Class I -- Restricted Controlled FR Eurodollar futures Jul. Jul. PPI CPI Dec. 26 Eurodollar Minutes Employment Report Aug. CPI Aug. PPI 5.8 5.6 5. Expected federal funds rates September 19, 26 August 7, 26 6. 5.5 5. Dec. 27 Eurodollar 5.2.5 5.. Aug. 7 Aug. 11 Aug. 18 Aug. 25 Sept. 1 Sept. 8 Sept. 15 Note. 5-minute intervals..8 3.5 Sept. Mar. Sept. Mar. Sept. 26 27 28 Note. Estimates from federal funds and Eurodollar futures with an allowance for term premiums and other adjustments. Yield curves 5.5 5..5 Change in nominal forward rates since August Basis points - -8-12 -16-2 1-2 3-5 5-1 Nominal 9/19/26* Nominal 8/7/26* TIPS 9/19/26** TIPS 8/7/26** 1 3 5 7 1 Maturity in Years *Smoothed yield curve estimated from off-the-run Treasury coupon securities. Yields shown are those on notional par Treasury securities with semi-annual coupons. **Smoothed yield curve estimated from TIPS securities. Yields shown are those on notional par TIPS securities with semi-annual coupons.. 3.5 3. 2.5 2. Change in TIPS forward rates since August Basis points 1-2 3-5 5-1 Change in inflation compensation forward rates since August Basis points 1-2 3-5 5-1 2 15 1 5-5 -1-6 -12-18 -2-3 -36 Page 1 of 5
September 2, 26 Authorized for Public Release 129 of 132 Exhibit 2 The Case for No Action Class I -- Restricted Controlled FR Inflation compensation Daily Next Five Years Five-Year Forward, Five Years Ahead. 3.5 Merrill Lynch Survey: Global inflation expectations In twelve months inflation will be: Higher June 62 Sept 1 3. 2.5 Unchanged 25 22 2. Lower 12 38 Apr. July Oct. Jan. Apr. July Oct. Jan. Apr. July 2 25 26 Note. Estimates based on smoothed nominal and inflation-indexed Treasury yield curves and adjusted for the carry effect. Output gap Quarterly September Greenbook August Greenbook 1.5 1..5. Source. Merrill Lynch Global Fund Manager Survey. Merrill Lynch Survey: Global growth expectations In twelve months growth will be: Higher June 13 Sept 1 -.5-1. Unchanged 25 18-1.5-2. Lower 61 73 22 23 2 25 26 27 28-2.5 Source. Merrill Lynch Global Fund Manager Survey. Spread between two- and ten-year Treasury yields Monthly age points 3 Merrill Lynch Survey: Global recession expectations Over the next twelve months a recession is: 2 June Sept 1 Very Likely 1 Fairly Likely 5 6-1 Fairly Unlikely 53 58-2 Very Unlikely 1 33 1968 1972 1976 198 198 1988 1992 1996 2 2 Note. Two- and ten-year yields are continuously compounded zero-coupon rates. Shaded regions mark NBER recession dates. Final observation is an average of data through Sept. 19. Page 2 of 5 Source. Merrill Lynch Global Fund Manager Survey.
September 2, 26 Authorized for Public Release 13 of 132 Exhibit 3 The Case for Action Class I -- Restricted Controlled FR Change in expected federal funds rate Dec. 26 to Dec. 27 -. 12 Corporate bond spreads Basis points Basis points Daily Wilshire 5 Daily Index: 1/3/5 = 1 12 -.5 1 35 3 115 11 Aug. 7 Aug. 18 Aug. 31 Sept. 1 Note. 5-minute intervals. -.5 -.55 -.6 8 6 Five-year BBB (right scale) Five-year high yield (left scale) 21 23 25 Note. Spreads over comparable-maturity Treasury yields. 25 2 15 1 Jan. May Oct. Mar. Aug. 25 26 15 1 95 9 Core PCE prices 3-month 12-month change, annual rate 3.5 3. 2.5 2. 1.5 1..5 2 21 22 23 2 25 26 27 28. Expected CPI inflation Michigan SRC, next twelve months Michigan SRC, next five to ten years 5 Compensation per hour Non-farm business sector Current August GB Four-quarter percent change 12 1 8 Sept. (p) 3 6 2 2 22 23 2 25 26 p Preliminary. 1 22 23 2 25 26 27 28 Page 3 of 5
September 2, 26 Authorized for Public Release 131 of 132 Exhibit Statement Alternatives Class I -- Restricted Controlled FR Alternative Intention Target Rate Assessment of Risk A Ratify expectations of easing Unchanged In recent weeks, the upside risks to inflation appear to have diminished somewhat and downside risks to growth have become more significant. In these circumstances, future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information. B Leave expectations about unchanged Unchanged Nonetheless, the Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information. B+ Emphasize that tightening is more likely than easing Unchanged Nonetheless, the Committee judges that some inflation risks remain and that policy is more likely to firm than ease going forward. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information. C- Impose additional restraint +25 basis points Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information. C Impose considerable additional restraint +25 basis points Nonetheless, the Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information. Page of 5
September 2, 26 Authorized for Public Release 132 of 132 Class I -- Restricted Controlled FR Exhibit 5 [Final Exhibit] Policy Decision Rationale Assessment of Risk Table 1: Alternative Language for the September Announcement August Alternative A Alternative B Alternative C 1. The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5¼ percent. 2. Economic growth has moderated from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices. 3. Readings on core inflation have been elevated in recent months, and the high levels of resource utilization and of the prices of energy and other commodities have the potential to sustain inflation pressures. However, inflation pressures seem likely to moderate over time, reflecting contained inflation expectations and the cumulative effects of monetary policy actions and other factors restraining aggregate demand.. Nonetheless, the Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information. The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5¼ percent. The moderation in economic growth appears to be continuing, partly reflecting a cooling of the housing market. Although core inflation remains elevated, recent readings have been slightly more favorable. While some inflation pressures persist, they seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations, and the cumulative effects of monetary policy actions and other factors restraining aggregate demand. In recent weeks, the upside risks to inflation appear to have diminished somewhat and downside risks to growth have become more significant. In these circumstances, future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information. The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5¼ percent. The moderation in economic growth appears to be continuing, partly reflecting a cooling of the housing market. Readings on core inflation have been elevated on balance, and the high levels of resource utilization and of the prices of energy and other commodities have the potential to sustain inflation pressures. However, inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations, and the cumulative effects of monetary policy actions and other factors restraining aggregate demand. [Unchanged] The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 5½ percent. Economic growth has moderated from its quite strong pace earlier this year, partly reflecting a cooling of the housing market. Readings on core inflation have been elevated on balance, and the high levels of resource utilization and of the prices of energy and other commodities have the potential to sustain inflation pressures. In these circumstances, the Committee believed that an additional firming of policy was appropriate to foster a decline in inflation. [Unchanged] Page 5 of 5