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Transcript of Fomc 20071031 Material
Appendix 1: Materials used by Mr. Dudley
October 30-31, 2007 143 of 162Authorized for Public Release
0
20
40
60
80
100
120
01/01/07 02/01/07 03/01/07 04/01/07 05/01/07 06/01/07 07/01/07 08/01/07 09/01/07 10/01/07
Price
0
20
40
60
80
100
120Price
BBB-
BBB
A
AA
AAA
S&P Ratings Downgrade: 10/17 and 10/19
ABX P rices for 07-01 Tranches
Source: JP Morgan
(1) Lower Rated ABX Tranches Keep Falling January 1, 2007 – October 26, 2007
800850900950
10001050110011501200
Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Aug-07 Sep-07 Oct-07
$ Billions
4.504.755.005.255.505.756.006.256.50
Percent
Total Outstanding Volume (LHS)Average 30-Day Rate (RHS)Average Overnight Rate (RHS)
FOM C Rate Cut: 9/18
Source: Federal Reserve Board
(2) Outstanding ABCP Volume Contraction Slows January 1, 2007 – October 24, 2007
-200
20406080
100120140160
01/01/07 02/01/07 03/01/07 04/01/07 05/01/07 06/01/07 07/01/07 08/01/07 09/01/07 10/01/07
BPS
-20020406080100120140160BPS
Secured CP - Unsecured CP
Secured CP - One Month OIS
(3) Secured CP Rate Spreads Narrow January 1, 2007 – October 26, 2007
Source: Federal Reserve Board
Class II FOMC – Restricted FR Page 1 of 10
October 30-31, 2007 144 of 162Authorized for Public Release
0
5
10
15
20
25
30
35
1/5 1/26 2/16 3/9 3/30 4/20 5/11 6/1 6/22 7/13 8/3 8/24 9/14 10/5 10/26Week Ending
$ Billions
Investment Grade
High-Yield
(4) High Yield Issuance Recovering January 2007 – October 2007
Source: Bloomberg
0
10
20
30
40
50
Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07
60$ Billions
CLOCDO
Source: Merrill Lynch
(5) CLO Issuance Picks Up, While CDO Issuance Remains Depressed January 2006 – October 2007
Class II FOMC – Restricted FR
5.50
5.75
6.00
6.25
6.50
6.75
7.00
01/01/07 02/01/07 03/01/07 04/01/07 05/01/07 06/01/07 07/01/07 08/01/07 09/01/07 10/01/075.50
5.75
6.00
6.25
6.50
6.75
7.00
7.25Percent
7.25Percent
Jumbo Mortgage Rates
Conforming Mortgage Rates
FOM C Rate Cut:
9/18
Source: Bloomberg
(6) Spread between Jumbo and Conforming Mortgage Rates Has Narrowed Somewhat January 1, 2007 – October 26, 2007
*Data for October 2007 includes issuance until 10/22/2007
Page 2 of 10
October 30-31, 2007 145 of 162Authorized for Public Release
0
100
200
300
400
500
600
700
06/01/07 07/01/07 08/01/07 09/01/07 10/01/07
BPS
0
20
40
60
80
100
120
140BPS
Mortgage Insurers (LHS)Financial Guarantors (LHS)Large Commercial Banks (RHS)Broker Dealers (RHS)
FOM C Rate Cut: 9/18
(9) CDS Spreads on Financials - A Bumpy RideJune 1, 2007 – October 26, 2007
Source: Markit
Class II FOMC – Restricted FR Page 3 of 10
0
20
40
60
80
100
120
07/01/07 07/15/07 07/29/07 08/12/07 08/26/07 09/09/07 09/23/07 10/07/07 10/21/07
BPS
0
20
40
60
80
100
120BPS
Spread between One-Month Libor and OIS rates
Spread between Three-Month Libor and OIS rates
FOM C Rate Cut: 9/18
(7) Spreads between U.S. Term Funding Rates and OIS Rates NarrowJuly 1, 2007 – October 26, 2007
Source: Bloomberg
0
20
40
60
80
100
07/01/07 07/15/07 07/29/07 08/12/07 08/26/07 09/09/07 09/23/07 10/07/07 10/21/07
BPS
0
20
40
60
80
100BPS
Spread between One-Month Euribor and EONIA swap rates
Spread between Three-Month Euribor and EONIA swap rates
(8) Euro Term Funding Pressures Still Evident July 1, 2007 – October 26, 2007
Source: Bloomberg
October 30-31, 2007 146 of 162Authorized for Public Release
100
200
300
400
500
600
03/01/07 04/01/07 05/01/07 06/01/07 07/01/07 08/01/07 09/01/07 10/01/07
BPS
100
200
300
400
500
600BPS
ITRAXX Crossover Series 7
LCDX
FOM C Rate Cut: 9/18
(10) Global Credit Default Swap SpreadsMarch 1, 2007 – October 26, 2007
Source: Bloomberg
95
100
105
110
115
01/01/07 02/01/07 03/01/07 04/01/07 05/01/07 06/01/07 07/01/07 08/01/07 09/01/07 10/01/0795
100
105
110
115
120Index to 100 on 1/1
120 Index to 100 on 1/1
S&P 500NasdaqRussell 2000
FOM C Rate Cut: 9/18
Source: Bloomberg
(11) U.S. Equity Indices Reverse Sharp DeclineJanuary 1, 2007 – October 26, 2007
Class II FOMC – Restricted FR
56789
10111213
01/01/07 02/01/07 03/01/07 04/01/07 05/01/07 06/01/07 07/01/07 08/01/07 09/01/07 10/01/07
Percent
5678910111213
Percent
S&P 500: Bottom-Up Equity Analyst Forecasts for 2007
S&P 500: Bottom-UpEquity Analyst Forecasts for 2008
(12) Equity Earnings ExpectationsJanuary 1, 2007 – October 19, 2007
Source: Thompson Financial
Page 4 of 10
October 30-31, 2007 147 of 162Authorized for Public Release
0.000.020.040.060.080.100.120.140.16
01/01/07 02/01/07 03/01/07 04/01/07 05/01/07 06/01/07 07/01/07 08/01/07 09/01/07 10/01/07
Skew
0.000.020.040.060.080.100.120.140.16Skew
Put - Call Equity Risk Reversal
(13) Demand for Downside Protection on S&P 500 Has FallenJanuary 1, 2007 – October 25, 2007
Source: OptionMetrics
Class II FOMC – Restricted FR
(14) Correlation of Daily Price/Yield ChangesAugust 7, 2007 – September 17, 2007
Blue boxes denote correlations greater than 0.50 or less than -0.50Source: Bloomberg and JP Morgan
Blue boxes denote correlations greater than 0.50 or less than -0.50Source: Bloomberg and JP Morgan
(15) Correlation of Daily Price/Yield ChangesSeptember 18, 2007 – October 26, 2007
Variables 2YR Yield10YR Yield S&P USD/JPY
Swap Spreads VIX CDX IG
2YR Yield10YR Yield 0.89S&P 0.75 0.75USD/JPY 0.80 0.77 0.71Swap Spreads -0.55 -0.35 -0.53 -0.37VIX -0.62 -0.51 -0.81 -0.64 0.56CDX IG 0.62 0.63 0.71 0.48 -0.58 -0.58Merrill-HY -0.84 -0.78 -0.57 -0.78 0.54 0.47 -0.56
Page 5 of 10
Variables 2YR Yield10YR Yield S&P USD/JPY
Swap Spreads VIX CDX IG
2YR Yield10YR Yield 0.77S&P 0.22 0.28USD/JPY 0.18 0.05 0.62Swap Spreads 0.37 0.27 -0.53 -0.53VIX -0.13 -0.26 -0.91 -0.52 0.47CDX IG 0.49 0.51 0.78 0.58 -0.37 -0.74Merrill-HY -0.67 -0.70 -0.40 -0.41 0.08 0.28 -0.65
October 30-31, 2007 148 of 162Authorized for Public Release
0
5
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30
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01/01/05 05/01/05 09/01/05 01/01/06 05/01/06 09/01/06 01/01/07 05/01/07 09/01/07
$ Price
0
5
10
15
20
25
30
35 $ Price
Average Spread Since Jan '05
(16) Oil Refining Crack Spread Near Lows January 1, 2005 – October 26, 2007
Source: Bloomberg
Class II FOMC – Restricted FR
92949698
100102
01/01/07 02/01/07 03/01/07 04/01/07 05/01/07 06/01/07 07/01/07 08/01/07 09/01/07 10/01/0792949698100102
Euro vs. Dollar: Index as of Jan07
as of Jan07
104106108110Index to 100
104106108110
Index to 100
Yen vs. Dollar: Index
(17) Dollar Stays on Gradual Downtrend January 1, 2007 – October 26, 2007
Dol
lar
Dep
reci
atio
n
Dol
lar
App
reci
atio
n
Broad Trade-Weighted Dollar: Index as of Jan97
Source: Bloomberg and Federal Reserve Board
-200
20406080
100120140
01/01/07 02/01/07 03/01/07 04/01/07 05/01/07 06/01/07 07/01/07 08/01/07 09/01/07 10/01/07
BPS1.281.301.321.341.361.381.401.421.44
$/Euro
Eurodollar-Euribor (LHS)
$/EUR (RHS)
Source: Bloomberg
(18) Dollar Tracks Interest Rate Differentials January 1, 2007 – October 26, 2007
Page 6 of 10
October 30-31, 2007 149 of 162Authorized for Public Release
3.0
3.5
4.0
4.5
5.0
5.5
6.0Percent
Survey Response -size indicates freq
September Average Forecast
Market Rates as of 9/10
(21) Distribution of Expected Policy Target Among Primary Dealers Prior to September 18 FOMC Meeting
Source: Dealer Policy Survey Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008
3.0
3.5
4.0
4.5
5.0
5.5
6.0Percent
Survey Response -size indicates freq
May Average Forecast
Market Rates as of 10/23
(20) Distribution of Expected Policy Target Among Primary Dealers Prior to October 31 FOMC Meeting
Source: Dealer Policy Survey
Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008
01020304050607080
9/18/2007 9/21/2007 9/26/2007 10/1/2007 10/4/2007 10/10/2007 10/15/2007 10/18/2007 10/23/2007 10/26/2007
Percent
4.25 Target Rate4.50 Target Rate4.75 Target Rate
Sept. Nonfarm Payrolls: 10/5
Sept. Housing Starts: 10/17
(19) Probabilities on Policy Rate Expectations for October FOMC MeetingSeptember 18, 2007 – October 26, 2007
Source: Cleveland Fed
Class II FOMC – Restricted FR Page 7 of 10
October 30-31, 2007 150 of 162Authorized for Public Release
2.20
2.40
2.60
2.80
3.00
06/01/06 09/01/06 12/01/06 03/01/07 06/01/07 09/01/07
Percent
2.20
2.40
2.60
2.80
3.00 Percent
Barclays
Federal Reserve Board
FOM C Rate Cut: 9/18
(22) TIPS Implied Inflation: 5-10 Year HorizonJune 1, 2006 – October 26, 2007
Source: Federal Reserve Board and Barclays Capital
Class II FOMC – Restricted FR
4.25
4.50
4.75
5.00
5.25
5.50
5.75
07/01/07 08/01/07 09/01/07 10/01/07
Percent
4.25
4.50
4.75
5.00
5.25
5.50
5.75 Percent
Effective Rate Target Rate
(24) Effective versus Target Fed Funds RateJuly 1, 2006 – October 26, 2007
Source: Federal Reserve Bank of New York
Page 8 of 10
4.70
4.72
4.74
4.76
4.78
4.80
4.82
4.84
09/18/07 09/25/07 10/02/07 10/09/07 10/16/07 10/23/07
Percent
4.70
4.72
4.74
4.76
4.78
4.80
4.82
4.84 Percent
Rolling Cumulative Effective Rate Since 9/19
Target Fed Funds Rate
(23) While Day-to Day Effective Rate Remain Volatile, Cumulative Effective Rate at TargetSeptember 18, 2007 – October 26, 2007
Source: Federal Reserve Bank of New York
October 30-31, 2007 151 of 162Authorized for Public Release
3.50
3.75
4.00
4.25
4.50
4.75
5.00
5.25
Years to Maturity
Percent
3.50
3.75
4.00
4.25
4.50
4.75
5.00
5.25 Percent
8/7/2007 9/17/2007 10/26/2007
(27) Treasury Yield Curve Shifts Lower and Continues to Steepen
Source: Bloomberg1-Year 2-Year 3-Year 5-Year 7-Year 10-Year
4.00
4.25
4.50
4.75
5.00
5.25
Dec-07 Mar-08 Jun-08 Sep-08 Dec-08Eurodollar Futures Contracts
Percent
4.00
4.25
4.50
4.75
5.00
5.25 Percent
8/7/2007 9/17/2007 10/26/2007
Source: Bloomberg
(25) Eurodollar Futures Curve Shifts Lower
Class II FOMC – Restricted FR APPENDIX: Reference Exhibits
0
4
8
12
16
20
1.75 2.00 2.25 2.50 2.75 3.00 3.25 3.50 3.75 4.00 4.25 4.50 4.75 5.00 5.25 5.50 5.75 6.00 6.25 6.50
Percent
0
4
8
12
16
20Percent
10/26/2007
9/17/2007
(26) Probability Distribution on Eurodollar Futures Contract 300 Days Forward
Source: CME Option
Page 9 of 10
October 30-31, 2007 152 of 162Authorized for Public Release
0
100
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500
03/01/07 04/01/07 05/01/07 06/01/07 07/01/07 08/01/07 09/01/07 10/01/07
BPS
0
100
200
300
400
500BPS
FOM C Rate Cut: 9/18
B
Ba
BaaA
Aa Aaa
S&P Rating Downgrades: 10/17 and
10/19
Source: Bloomberg
(29) US Corporate Option-Adjusted Debt Spread by RatingMarch 1, 2007 – October 26, 2007
0
20
40
60
80
100
120
140Percent
0
5
10
15
20
25
30
35 Percent
VIX (RHS)
1-Month Dollar-Yen Vol (RHS)
1-Month Euro-Dollar Vol (RHS)
SMOVE (LHS)
FOM C Rate Cut: 9/18
(28) Implied Volatility Increases in Recent Days January 1, 2007 – October 26, 2007
Page 10 of 10Class II FOMC – Restricted FR
01/01/07 02/01/07 03/01/07 04/01/07 05/01/07 06/01/07 07/01/07 08/01/07 09/01/07 10/01/07Source: Bloomberg
October 30-31, 2007 153 of 162Authorized for Public Release
Appendix 2: Materials used by Mr. Madigan
October 30-31, 2007 154 of 162Authorized for Public Release
Class I FOMC – Restricted Controlled (FR)
Material for FOMC Briefing on October Projections
Brian Madigan October 30, 2007
October 30-31, 2007 155 of 162Authorized for Public Release
2007 2008 2009 2010Central Tendencies
Real GDP Growth 2.2 to 2.3 1.8 to 2.5 2.3 to 2.7 2.5 to 2.6June projections 2-1/4 to 2-1/2 2-1/2 to 2-3/4
Unemployment Rate 4.7 to 4.8 4.8 to 5.0 4.8 to 5.0 4.7 to 4.9June projections 4-1/2 to 4-3/4 about 4-3/4
PCE Inflation 2.9 to 3.0 1.8 to 2.1 1.7 to 2.0 1.6 to 1.9
Core PCE Inflation 1.8 to 1.9 1.7 to 1.9 1.7 to 1.9 1.6 to 1.9June projections 2 to 2-1/4 1-3/4 to 2
RangesReal GDP Growth 2.2 to 2.5 1.6 to 2.6 2.0 to 2.8 2.2 to 2.7
June projections 2 to 2-3/4 2-1/2 to 3
Unemployment Rate 4.7 to 4.8 4.6 to 5.0 4.6 to 5.0 4.6 to 5.0June projections 4-1/2 to 4-3/4 4-1/2 to 5
PCE Inflation 2.7 to 3.2 1.7 to 2.3 1.5 to 2.2 1.5 to 2.0
Core PCE Inflation 1.8 to 2.1 1.7 to 2.0 1.5 to 2.0 1.5 to 2.0June projections 2 to 2-1/4 1-3/4 to 2
1. Projections of real GDP growth, PCE inflation and core PCE inflation are fourth-quarter-to-fourth-quarter growth rates, i.e. percentage changes from the fourth quarter of the prior year to the fourth quarter of the indicated year. PCE inflation and core PCE inflation are the percentage rates of change in the price index for personal consumption expenditures and the price index for personal consumption expenditures excluding food and energy, respectively. Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of each year. Each participant's projections are based on his or her assessment of appropriate monetary policy. The range for each variable in a given year includes all participants' projections, from lowest to highest, for that variable in the given year; the central tendencies exclude the three highest and three lowest projections for each variable in each year.
Table 1: Economic Projections of Federal Reserve Governors and Reserve Bank Presidents 1
October 30-31, 2007 156 of 162Authorized for Public Release
Appendix 3: Materials used by Mr. Stockton
October 30-31, 2007 157 of 162Authorized for Public Release
2007-Q2Final Greenbook Advance
Real GDP 3.8 3.3 3.9
Final Sales 3.6 3.6 3.5 Personal Consumption 1.4 3.2 3.0 Durables 1.7 2.8 4.4 Nondurables -0.5 2.9 2.7 Services 2.3 3.4 2.9 Business Fixed Investment 11.0 6.2 7.9 Nonresidential Structures 26.2 3.7 12.3 Equipment and Software 4.7 7.4 5.9 Residential Investment -11.8 -22.4 -20.1 Government 4.1 3.2 3.7 Federal 6.0 5.8 6.8 State and Local 3.0 1.8 2.0 Exports 7.5 16.9 16.2 Imports -2.7 3.5 5.2
Level in chained 2000 dollars:
Change in nonfarm business inventories 1.3 -4.2 12.4Change in farm inventories 3.6 1.0 2.9Net Exports -573.9 -535.9 -546.2
Price Indexes:
Total PCE Chain Price Index 4.3 1.5 1.7 Core PCE Chain Price Index 1.4 1.6 1.8
Gross Domestic Product(percent change at an annual rate)
2007-Q3
Page 1 of 1
October 30-31, 2007 158 of 162Authorized for Public Release
Appendix 4: Materials used by Mr. Madigan
October 30-31, 2007 159 of 162Authorized for Public Release
Class I FOMC – Restricted Controlled (FR)
Material for FOMC Briefing on Monetary Policy Alternatives Brian Madigan October 31, 2007
October 30-31, 2007 160 of 162Authorized for Public Release
Class I FOMC – Restricted Controlled (FR) Table 1: Alternative Language for the October 2007 FOMC Announcement Bluebook version
September FOMC Alternative A Alternative B Alternative C
Policy Decision
1. The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 4-3/4 percent.
The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 4-1/2 percent.
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 4-3/4 percent.
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 4-3/4 percent.
2. Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.
Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance. However, the pace of economic expansion will likely slow somewhat in the near term, partly reflecting the intensification of the housing correction. Today’s action, combined with the policy action taken in September, should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and promote moderate growth over time.
Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance. The pace of economic expansion will likely slow somewhat in the near term, partly reflecting the intensification of the housing correction. But, to date, other sectors of the economy have proven resilient and the global economy remains strong. The Committee anticipates that the economic expansion will return to a moderate pace over time, but sees continuing risks to growth, notably the potential impact of the tightening of credit conditions for some households and businesses.
Economic growth was solid in the third quarter despite an intensification of the housing correction. Strains in financial markets have eased somewhat on balance, reducing the downside risks to growth. Though incoming indicators point to some near-term slowing in the pace of economic expansion, the recent easing of monetary policy should help promote moderate growth over time.
Rationale
3. Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.
Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.
Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.
Readings on core inflation have improved modestly this year, but the high level of resource utilization and recent increases in energy prices may put renewed upward pressures on overall and core inflation.
Assessment of Risk
4. Developments in financial markets since the Committee’s last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.
The Committee judges that the upside risks to inflation roughly balance the downside risks to growth. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.
On balance, the Committee views downside risks to growth as the greater policy concern. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.
The Committee judges that the upside risks to inflation roughly balance the downside risks to growth. Future policy adjustments will depend on the outlook for both inflation and economic growth, as implied by incoming information.
October 30-31, 2007 161 of 162Authorized for Public Release
Class I FOMC – Restricted Controlled (FR) Table 1: Alternative Language for the October 2007 FOMC Announcement Revised: October 31, 2007
September FOMC Alternative A Alternative B Alternative C
Policy Decision
1. The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 4-3/4 percent.
The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 4-1/2 percent.
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 4-3/4 percent.
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 4-3/4 percent.
2. Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.
Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance. However, the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction. Today’s action, combined with the policy action taken in September, should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and promote moderate growth over time.
Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance. The pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction. But, to date, other sectors of the economy have proven resilient and the global economy remains strong. The Committee anticipates that the economic expansion will return to a moderate pace over time, but sees continuing risks to growth, notably the potential impact of the tightening of credit conditions for some households and businesses.
Economic growth was solid in the third quarter despite an intensification of the housing correction. Strains in financial markets have eased somewhat on balance, reducing the downside risks to growth. Though incoming indicators point to some near-term slowing in the pace of economic expansion, the recent easing of monetary policy should help promote moderate growth over time.
Rationale
3. Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.
Readings on core inflation have improved modestly this year, but recent increases in energy and commodity prices, among other factors, may put renewed upward pressure on inflation. In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.
Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.
Readings on core inflation have improved modestly this year, but recent increases in energy and commodity prices, among other factors, may put renewed upward pressure on inflation. In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.
Assessment of Risk
4. Developments in financial markets since the Committee’s last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.
The Committee judges that, after this action, the upside risks to inflation roughly balance the downside risks to growth. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.
On balance, the Committee views downside risks to growth as the greater policy concern. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.
The Committee judges that the upside risks to inflation roughly balance the downside risks to growth. Future policy adjustments will depend on the outlook for both inflation and economic growth, as implied by incoming information.
October 30-31, 2007 162 of 162Authorized for Public Release