FOMC Minutes
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Minutes of the Federal Open Market Committee
June 24-25, 2008
A meeting of the Federal Open Market Committee was
held in the offices of the Board of Governors of the
Federal Reserve System in Washington, D.C., on Tuesday, June 24, 2008 at 2:00 p.m. and continued on
Wednesday, June 25, 2008 at 9:00 a.m.
PRESENT:
Mr. Bernanke, Chairman
Mr. Geithner, Vice Chairman
Mr. Fisher
Mr. Kohn
Mr. Kroszner
Mr. Mishkin
Ms. Pianalto
Mr. Plosser
Mr. Stern
Mr. Warsh
Ms. Cumming, Messrs. Evans, Lacker, and Lockhart, and Ms. Yellen, Alternate Members of the
Federal Open Market Committee
Messrs. Bullard, Hoenig, and Rosengren, Presidents of the Federal Reserve Banks of St.
Louis, Kansas City, and Boston, respectively
Mr. Madigan, Secretary and Economist
Ms. Danker, Deputy Secretary
Mr. Skidmore, Assistant Secretary
Ms. Smith, Assistant Secretary
Mr. Alvarez, General Counsel
Mr. Baxter, Deputy General Counsel
Mr. Sheets, Economist
Mr. Stockton, Economist
Messrs. Connors, English, and Kamin, Ms. Mester,
Messrs. Rolnick, Rosenblum, Slifman, Tracy,
and Wilcox, Associate Economists
Mr. Dudley, Manager, System Open Market Account
Secretary, Office of the Secretary,
Ms. J.
Board of Governors
Johnson,1
Mr. Cole, Director, Division of Banking Supervision and Regulation, Board of Governors
Mr. Struckmeyer, Deputy Staff Director, Office of
Staff Director for Management, Board of
Governors
Mr. Blanchard, Assistant to the Board, Office of
Board Members, Board of Governors
Mr. Frierson,1 Deputy Secretary, Office of the Secretary, Board of Governors
Ms. Bailey,1 Deputy Director, Division of Banking
Supervision and Regulation, Board of Governors
Mr. Clouse, Deputy Director, Division of Monetary Affairs, Board of Governors
Mr. Parkinson,1 Deputy Director, Division of Research and Statistics, Board of Governors
Ms. Barger,1 Deputy Director, Division of Banking
Supervision and Regulation, Board of Governors
Mr. Stehm,1 Associate Director, Division of Reserve Bank Operations and Payment Systems,
Board of Governors
Messrs. Reifschneider and Wascher, Associate Directors, Division of Research and Statistics,
Board of Governors
Mr. Gagnon,2 Visiting Associate Director, Division
of Monetary Affairs, Board of Governors
Mr. Wright, Deputy Associate Director, Division
of Monetary Affairs, Board of Governors
Mr. Zakrajšek, Assistant Director, Division of
Monetary Affairs, Board of Governors
Mr. Erceg,2 Assistant Director, Division of International Finance, Board of Governors
_________________
Attended portion of the meeting relating to the
supervisory report concerning investment banks
and related policy issues.
2 Attended portions of the meeting through the
policy vote.
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Federal Open Market Committee
Mr. Oliner, Senior Adviser, Division of Research
and Statistics, Board of Governors
Mr. Gross,1 Special Assistant to the Board, Office
of Board Members, Board of Governors
Ms. Tevlin,2 Senior Economist, Division of Research and Statistics, Board of Governors
Mr. Ammer,2 Senior Economist, Division of International Finance, Board of Governors
Ms. Beechey, Economist, Division of Monetary
Affairs, Board of Governors
Ms. Dykes, Project Manager, Division of Monetary
Affairs, Board of Governors
Mr. Luecke, Section Chief, Division of Monetary
Affairs, Board of Governors
Ms. Beattie,1 Assistant to the Secretary, Office of
the Secretary, Board of Governors
Ms. Low, Open Market Secretariat Specialist, Division of Monetary Affairs, Board of Governors
Ms. Hughes,1 Staff Assistant, Office of the Secretary, Board of Governors
Mr. Barron, First Vice President, Federal Reserve
Bank of Atlanta
Mr. Fuhrer, Executive Vice President, Federal Reserve Bank of Boston
Messrs. Altig, Angulo,1 Rasche, Schweitzer, Sellon,
and Weinberg, Senior Vice Presidents, Federal
Reserve Banks of Atlanta, New York, St.
Louis, Cleveland, Kansas City, and Richmond,
respectively
Messrs. Fernald and Fisher, and Ms. McLaughlin,
Vice Presidents, Federal Reserve Banks of San
Francisco, Chicago, and New York, respectively
_________________
1 Attended portion of the meeting relating to the
supervisory report concerning investment banks
and related policy issues.
2 Attended portions of the meeting through the
policy vote.
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The Manager of the System Open Market Account
reported on recent developments in foreign exchange
markets. There were no open market operations in
foreign currencies for the System’s account in the period since the previous meeting. The Manager also
reported on developments in domestic financial markets and on System open market operations in government securities and federal agency obligations during the period since the previous meeting. By unanimous vote, the Committee ratified these transactions.
The information reviewed at the June meeting indicated that economic activity had remained soft in recent months. Manufacturing activity had deteriorated,
business investment in equipment appeared to have
moved down, and residential construction had continued its steep descent. Labor market conditions had
weakened further, and consumer sentiment was at historical lows, but despite these developments, consumer
spending appeared resilient. Core consumer price inflation had been stable over recent months, but headline inflation had remained elevated because of further
substantial increases in food and energy prices.
Labor demand continued to weaken in April and May.
Private payroll employment fell at a slower rate than
earlier in the year, but the decline in jobs was again
widespread, with the exception of nonbusiness services.
As a result, aggregate hours of private production or
nonsupervisory workers fell, on average, in April and
May. The unemployment rate jumped from 5.0 percent in April to 5.5 percent in May and was now about
a percentage point above its level of a year ago. The
increase from April to May was accompanied by a rise
in labor force participation, especially among young
people.
Industrial production contracted in April and May at a
slightly faster pace than in the first quarter. Manufacturing output also fell in April and was unchanged in
May; over the two months, factory production slowed
across a broad range of industries. Production in the
high-tech sector continued to expand but at only a
modest rate. The factory utilization rate edged down
further in April and May to a level below its firstquarter average and was well below its recent high in
the third quarter of 2007.
The growth of real consumer spending appeared to
have picked up moderately from its sluggish pace in the
first quarter. Real outlays on goods other than motor
vehicles increased at a robust pace, on average, in April
and May. However, retail purchases of motor vehicles
fell to a low level. More broadly, households’ financial
conditions appeared to have weakened in recent
Minutes of the Meeting of June 24-25, 2008
months. Real disposable personal income had been
rising only slowly since last summer, restrained by the
gradual deterioration in labor market conditions and
sharp increases in food and energy prices. The ratio of
household wealth to income had dropped sharply in
the first quarter, reflecting substantial net declines in
broad equity prices and further depreciation of house
prices. Measures of consumer sentiment fell further in
April and May; the May readings from the
Reuters/University of Michigan Surveys of Consumers
and the Conference Board Consumer Confidence Survey were near their low points reached during the early
1990s.
Activity in the housing sector remained very weak in
April and May. Single-family housing starts posted
further declines, leaving the pace of construction in this
sector down about two-thirds from the peak in early
2006; starts of multifamily homes were a bit below their
average over the last 10 years. Although production
cuts in the single-family housing sector resulted in continued reductions of inventories of unsold new homes,
the slow pace of sales left the ratio of unsold new
homes to sales at elevated levels not seen since the
early 1980s. Sales of existing homes remained little
changed through April at a low level. However, the
index of pending sales agreements—an indicator of
existing home sales in coming months—jumped in
April to its highest reading in six months. Conditions
in mortgage credit markets remained tight, particularly
for nonprime borrowers and for those seeking nonconforming mortgages.
In the business sector, real spending on equipment and
software appeared to move down a bit further in April
and May following a slight decrease in the first quarter.
Business outlays on transportation equipment continued to fall sharply. The data on shipments and orders
of nondefense capital goods through May suggested
that spending on high-tech equipment and software
was expanding sluggishly, while outlays for other
equipment remained weak. The slower pace of capital
expenditures appeared consistent with a general deterioration of business conditions, including a deceleration of sales, a pessimistic tone across monthly surveys
of business conditions, and tighter standards and terms
on business credit. Real spending on nonresidential
construction continued to rise in the first quarter, but
at a substantially slower rate than over the previous two
years. The architectural billing index plummeted recently, and vacancy rates for commercial properties
ticked up.
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Real nonfarm inventories excluding motor vehicles
rose only slightly in the first quarter, as firms cut production to keep inventories aligned with the sluggish
pace of sales. The ratio of book-value inventories to
sales (excluding motor vehicles) ticked down in April
and had changed relatively little, on net, since the middle of 2007. Despite sharply lower sales of motor vehicles, the modest pace of production allowed inventories
to fall further through May. Production at automakers
was restrained by both weak demand and disruptions
caused by labor disputes.
The U.S. international trade deficit widened in April, as
a jump in imports outweighed a rise in exports. Most
categories of goods imports rebounded in April from
lower levels in March, especially petroleum products,
the prices of which had moved sharply higher. Imports
of non-oil industrial supplies, capital goods, and automotive products also surged in April, whereas imports
of consumer goods expanded more slowly. The increase in exports was broad-based, with strong increases in exports of industrial supplies, capital and
consumer goods, and automotive products.
Economic activity in advanced foreign economies appeared to have expanded moderately in the first quarter, but the pace of that activity varied markedly across
economies. In the euro area and Japan, strong investment contributed to a sharp acceleration in output.
Economic growth in the United Kingdom moderated
because of a slowdown in real estate and business activities. Falling exports and inventories subtracted
from Canadian output growth. Recent data pointed to
broad softness across the advanced foreign economies
in the second quarter, consistent with a weakening of
consumer and business confidence. Indicators for
emerging market economies pointed to continued solid
growth in the first quarter, albeit at a slower pace than
last year among Latin American economies. In particular, economic activity in Mexico slowed further in the
first quarter, in the wake of weaker growth in the
United States. In contrast, real output in China and
India appeared to have continued expanding at the
rapid rates seen in 2007. Inflation stayed high, on balance, in all regions, as recent price increases for food
and energy added to global inflationary pressures.
Headline consumer price inflation in the United States
remained elevated in April and May, mostly because of
large increases in food and energy prices. Excluding
these categories, core prices rose at a relatively subdued
rate in these two months. Average hourly earnings increased in April and May at a slower pace than in the
first quarter, bringing the change over the 12 months
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Federal Open Market Committee
ending in May below the pace over the previous 12
months. The employment cost index for hourly compensation rose moderately in the first quarter and at a
similar rate to recent years.
At its April 29-30 meeting, the Federal Open Market
Committee (FOMC) lowered its target for the federal
funds rate 25 basis points, to 2 percent. In addition,
the Board of Governors approved a decrease of 25
basis points in the discount rate, to 2¼ percent. The
Committee’s statement noted that recent information
indicated that economic activity remained weak; household and business spending had been subdued, and
labor markets had softened further. Financial markets
remained under considerable stress, and tight credit
conditions and the deepening housing contraction were
likely to weigh on economic growth over the next few
quarters. Although readings on core inflation had improved somewhat, energy and other commodity prices
had increased, and some indicators of inflation expectations had risen in recent months. The Committee expected inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other
commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation
outlook remained high, and the Committee noted that
it would be necessary to continue to monitor inflation
developments closely. The Committee stated that the
substantial easing of monetary policy to date, combined
with ongoing measures to foster market liquidity,
should help to promote moderate growth over time
and to mitigate risks to economic activity. The Committee indicated that it would continue to monitor economic and financial developments and act as needed to
promote sustainable economic growth and price stability.
The expected path of monetary policy moved down
following the Committee’s decision at its April meeting
to reduce the target federal funds rate by 25 basis
points. Although the decision had largely been anticipated by financial markets, investors had assigned some
odds to an unchanged target rate. Subsequently,
money market futures rates rose substantially, on net,
as stronger-than-expected data on spending and on
labor markets along with somewhat improved conditions in financial markets appeared to impart greater
confidence about prospects for economic activity.
Nominal Treasury yields also rose noticeably, and the
Treasury yield curve flattened. Measures of short-term
inflation compensation derived from yields on inflation-indexed Treasury securities increased over the intermeeting period, due in part to sharply higher prices
for oil and agricultural commodities. Measures of
_
longer-term inflation compensation remained around
the middle of their recent elevated range. Some survey
measures of households’ expectations of near-term
inflation rose sharply, while survey measures of longerterm expectations ranged from unchanged to slightly
higher.
Conditions eased somewhat in some U.S. financial
markets over the intermeeting period but nonetheless
remained strained. Functioning of short-term funding
markets showed some improvement; spreads in interbank funding markets generally declined, as did spreads
on lower-rated commercial paper. However, liquidity
in the market for interbank loans at maturities beyond
three months remained thin, and the spreads quoted on
those instruments were little changed. Demand for
funds from the Term Auction Facility remained substantial, but stop-out rates relative to minimum bid
rates declined considerably relative to prior auctions,
likely in response to increased auction sizes. Depository institutions’ use of primary credit borrowing increased, on balance, over the intermeeting period.
Credit outstanding through the Primary Dealer Credit
Facility declined significantly over the intermeeting period. Conditions in the market for Treasury repurchase
agreements appeared to improve somewhat, but conditions were still poor for lower-quality collateral. Supported by sales and redemptions of Treasury securities
from the System Open Market Account and exchanges
under the Term Securities Lending Facility, yields on
overnight Treasury repurchase agreements were around
typical spreads to the effective federal funds rate during
much of the intermeeting period, but “haircuts” applied by lenders on non-Treasury collateral remained
elevated. Term Securities Lending Facility auctions
held since the April FOMC meeting were generally undersubscribed.
In longer-term credit markets, yields on investmentand speculative-grade corporate bonds had risen significantly since the end of April but by slightly less than
yields on comparable-maturity Treasury securities, implying a further modest narrowing of credit spreads.
Corporate bond issuance surged in May, as some nonfinancial firms reduced their reliance on short-term
debt in favor of bond financing. Commercial paper
outstanding declined, and business lending by banks
decelerated, partly reflecting continued low issuance of
leveraged loans as well as tighter credit standards and
terms at banks. Over the intermeeting period, spreads
of rates on conforming residential mortgages over
comparable-maturity Treasury securities remained
about flat. Spreads on jumbo mortgages, however,
widened somewhat and credit availability for jumbo-
Minutes of the Meeting of June 24-25, 2008
mortgage borrowers continued to be tight. In the secondary market, issuance of mortgage-backed securities
by government-sponsored enterprises was strong, but
issuance of securities backed by nonconforming residential mortgages and commercial mortgages remained
low. Broad stock prices were somewhat volatile but
declined modestly, on net, over the intermeeting period. The surge in oil prices weighed on equity prices
outside of the energy sector, and a more pessimistic
outlook for future earnings in the financial sector
caused stocks of financial institutions to decline significantly.
Conditions in the money markets of many major foreign economies remained strained, showing little improvement since late April despite ongoing activities of
foreign central banks aimed at easing liquidity pressures
in funding markets. Yields on sovereign debt in the
advanced foreign economies moved up approximately
in line with increases in comparable Treasury yields in
the United States. The trade-weighted foreign exchange value of the dollar against major currencies
rose.
M2 rose much more slowly in April and May than in
the first quarter. The deceleration seemed to reflect
primarily an unwinding of heightened demand for the
relative safety and liquidity of money market mutual
funds that had boosted M2 in prior months.
In the forecast prepared for the meeting, the staff
raised its projection for the growth of real gross domestic product (GDP) for 2008. The available indicators of spending, particularly those for consumption
and business investment, suggested that economic activity in the first half of the year had been somewhat
firmer than previously expected. The staff projection
prepared for the meeting pointed to modest expansion
in real GDP in the first half of 2008 followed by a
slight slowdown in growth in the second half, when
several factors were likely to restrain spending, including lower household wealth, slower real income growth
due to sharply higher oil prices, and tight credit conditions. The pace of economic activity was projected to
pick up in 2009 as those effects waned and weakness in
housing construction abated. Despite this acceleration,
the trajectory of economic growth anticipated through
2009 implied noticeable slack in resource utilization.
The staff’s projection for price inflation in core personal consumption expenditures (PCE) for 2008 as a
whole was unchanged; recent readings on core PCE
inflation were better than anticipated and led the staff
to lower its projection for the first half of the year. But
some of the recent improvement was seen as reflecting
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transitory factors, and the forecast of core inflation for
the second half of this year and next year was marked
up to incorporate the likely pass-through of the recent
jumps in the prices of energy and other commodities,
and the reversal of these transitory factors. The further
large increase in energy prices also prompted an upward revision of the forecast of headline PCE inflation
in the second half of 2008, and headline inflation was
expected to exceed core inflation by a considerable
margin this year. However, in view of a projected leveling-out of energy prices and the anticipated slack in
resource utilization, headline inflation was expected to
decline considerably in 2009 from its pace in the second half of 2008, and core inflation was forecasted to
edge lower.
In conjunction with the FOMC meeting in June, all
meeting participants (Federal Reserve Board members
and Reserve Bank presidents) provided projections for
economic growth, the unemployment rate, and inflation for the years 2008 through 2010. The projections
are described in the Summary of Economic Projections, which is attached as an addendum to these minutes. A number of participants noted that, given the
recent large adverse shocks to output and inflation,
their projections even late in the forecast period did not
fully reveal their perceptions of longer-run sustainable
rates of economic growth and unemployment or the
measured rates of inflation that would be consistent
with price stability. In this context, participants discussed several possible refinements of the Committee’s
approach to projections that could provide a clearer
indication of participants’ views about these variables
and agreed to consider this matter further.
In their discussion of the economic situation and outlook, FOMC participants noted that spending in recent
months had evidently been less weak than anticipated,
leading participants to revise up their assessment of
economic growth in the first half of 2008. Nonetheless, most participants judged that the slightly firmer
path of spending did not presage a near-term strengthening of the expansion. Economic activity would
probably continue to expand slowly over the next several quarters, restrained by a range of factors, including
strains in financial markets and institutions and the resulting tightness of credit conditions; ongoing weakness in the housing sector; and the increases in energy
and agricultural commodity prices. And, although the
incoming data suggested reduced odds that these factors would cause an appreciable contraction of economic activity in the near term, participants continued
to see significant downside risks to growth. At the
same time, however, the outlook for inflation had dete-
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Federal Open Market Committee
riorated. Recent increases in energy and some other
commodity prices would boost inflation sharply in
coming months. A leveling-out of energy prices and
continued slack in resource utilization were expected to
lead inflation to moderate in 2009 and 2010. However,
participants had become more concerned about upside
risks to the inflation outlook—including the possibility
that persistent advances in energy and food prices
could spur increases in long-run inflation expectations.
Although financial market conditions generally appeared to have improved somewhat over the intermeeting period, most participants viewed markets as remaining under considerable stress. Some participants noted
that the availability of the liquidity facilities that the
Federal Reserve had introduced in recent months had
probably bolstered the confidence of investors and
lenders and thus was likely responsible for part of the
improvement in market functioning. Term spreads in
interbank funding markets had declined, but remained
elevated by historical standards. The leveraged loan
market had improved somewhat and corporate bond
issuance had been strong. However, the equity prices
of many investment and commercial banks had declined over the intermeeting period, reflecting increased
concern about asset quality and the outlook for profits.
The deteriorating condition of some financial guarantors and mortgage insurers contributed to worries
about banks. Investors remained chary of securitized
products, such as mortgage credits not guaranteed by a
government-sponsored enterprise or agency. A number of financial institutions had been successful in raising new capital, but reportedly on less favorable terms
than before. Participants judged that many financial
institutions would need to continue to recapitalize and
reduce their leverage. Some anticipated that this process could well be protracted, and that financial intermediation consequently would be impeded for some
time, holding back growth well into 2009. Overall, financial market conditions, while better in many respects, appeared to remain fragile, and participants
judged that potential further adverse financial market
developments still posed downside risks to economic
activity.
Recent data pointed to more resilience in consumer
spending in the second quarter than had been expected.
However, most participants thought that much of the
recent strength probably indicated only a more delayed
slowing in consumer spending than had been expected
rather than a more favorable trend. Falling wealth and
real income, tightening credit conditions, rising energy
prices, and sharply declining consumer sentiment were
seen as likely to restrain consumer spending later this
_
year, particularly after the effects of the fiscal stimulus
waned. Lenders were exhibiting greater caution in extending credit to households, partly in response to actual and expected increases in delinquency rates on
household credit. Participants reported that second
mortgages, automobile loans, and home equity lines of
credit were becoming harder to obtain, and some existing home equity lines were being cut, even for consumers with good credit scores. The possibilities that the
decline in house prices would be more protracted than
previously anticipated, that spillovers from the decline
in housing wealth to consumption could be larger than
expected, and that the household saving rate might rise
more steeply than currently projected were seen as posing downside risks to consumption spending going forward.
Participants judged that the outlook for the housing
market remained bleak, with falling prices, slow sales,
high inventories of unsold homes, and further declines
in construction activity over coming months. Although
a few participants saw tentative signs that the housing
market might be bottoming out in some parts of the
country, most aggregate indicators of housing activity
pointed to continued weakness. Also, mortgage rates
had increased, and the equity prices of housing-related
firms had fallen over the intermeeting period, after having stabilized earlier in the year, suggesting renewed
pessimism among investors about prospects for the
housing industry. Rising foreclosures were seen as
likely to continue to add to downward pressure on
house prices.
Business spending was expected to remain sluggish, as
tight credit conditions, uncertainty about economic
growth, and the rising costs of inputs―especially energy
and raw materials―appeared to be making firms quite
cautious and inclined to defer capital expenditures.
Businesses had been able to raise a considerable volume of funds in bond markets of late, and profits and
cash flow were still strong in the nonfinancial business
sector. But some regional banks that had experienced
substantial credit losses were expected to adopt a significantly more conservative lending posture, further
limiting the availability of credit to small businesses.
Although the available data indicated that spending on
nonresidential construction projects had remained relatively robust in recent months, participants thought
that this strength might have reflected projects initiated
some time ago, when the economic outlook and credit
conditions were more favorable, and they expected
poor business sentiment and tighter credit to lead
commercial construction to soften later this year and
next year. Some anecdotal reports of recently delayed
Minutes of the Meeting of June 24-25, 2008
or canceled new construction projects supported this
view.
Regarding economic activity in various business sectors, participants reported continued overall softness in
manufacturing, especially in the housing-related and
motor vehicle sectors. Flooding in the Midwest had
disrupted transportation and damaged corn and soybean crops. However, production in the energy and
steel sectors appeared to be strengthening, and industry
contacts generally reported that demand for exported
goods was buoyant. Labor markets in most regions
continued to weaken gradually. Most participants anticipated persistent slack in labor markets, with the unemployment rate rising further through next year, before declining slightly in 2010.
The current account deficit had narrowed significantly
on balance in recent quarters, and still-solid foreign
growth was expected to contribute to a further narrowing of the real U.S. trade deficit in coming quarters.
However, a few participants commented that this effect
might fade over time, as they expected demand in foreign economies to slow.
Participants were concerned about the inflationary consequences of recent increases in the prices of energy,
food, and imports, and they expected headline inflation
to rise in the very near term. However, core inflation
had been stable of late, and participants anticipated that
a leveling-out of energy prices and slack in labor and
product markets would contribute to a moderation of
inflation pressures over time. Reports on the ability of
firms to pass cost increases on to customers were
mixed, but some participants commented that the
global nature of inflationary pressures could make imports more expensive and give firms greater scope to
raise prices. Some participants noted that wage growth
had been quite moderate, reinforcing a view that
longer-term inflation expectations and labor cost pressures had remained fairly well contained. However,
others commented that wages might accelerate with a
lag only after inflation expectations had moved higher,
and that it would be very costly to subsequently bring
those expectations back down. Participants’ views of
the recent evidence on inflation expectations varied.
Some noted that the increase was greatest for shortterm survey measures of households’ inflation expectations, which may be influenced disproportionately by
consumers’ perceptions of changes in the prices of
food and gasoline; those participants judged that underlying inflation trends had not risen nearly as much and
anticipated that such survey measures would reverse
their recent increases as headline inflation moderated.
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However, others saw the signs of a rise in inflation expectations as more broad-based and were concerned
that this development could signal an erosion of confidence in the Committee’s commitment to price stability
and, absent effective action by the Committee, could
impart greater momentum to the inflation process.
Participants agreed that the possibilities of greater passthrough of cost increases into prices, higher long-run
inflation expectations feeding into labor costs and
other prices, and further increases in energy prices all
posed upside risks to inflation that had intensified since
the time of the April FOMC meeting.
Some participants noted that certain measures of the
real federal funds rate, especially those using actual or
forecasted headline inflation, were now negative, and
very low by historical standards. In the view of these
participants, the current stance of monetary policy was
providing considerable support to aggregate demand
and, if the negative real federal funds rate was maintained, it could well lead to higher trend inflation. In
this view, a significant portion of the easing in monetary policy since last fall was aimed at providing insurance against the risk of an especially severe weakening
in economic activity and, with downside risks having
diminished somewhat, some firming in policy would be
appropriate very soon, if not at this meeting. However,
other participants observed that the high level of risk
spreads and the restricted availability of credit suggested that overall financial conditions were not especially accommodative; indeed, borrowing costs for
many households and businesses were higher than they
had been last summer.
In the Committee’s discussion of monetary policy for
the intermeeting period, members generally agreed that
the risks to growth had diminished somewhat since the
time of the last FOMC meeting while the upside risks
to inflation had increased. Nonetheless, the risks to
growth remained tilted to the downside. Conditions in
some financial markets had improved, but many financial institutions continued to experience significant
credit losses and balance sheet pressures, and in these
circumstances credit availability was likely to remain
constrained for some time. At the same time, however,
the near-term outlook for inflation had deteriorated,
and the risks that underlying inflation pressures could
prove to be greater than anticipated appeared to have
risen. Members commented that the continued strong
increases in energy and other commodity prices would
prompt a difficult adjustment process involving both
lower growth and higher rates of inflation in the near
term. Members were also concerned about the heightened potential in current circumstances for an upward
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Federal Open Market Committee
drift in long-run inflation expectations. With increased
upside risks to inflation and inflation expectations,
members believed that the next change in the stance of
policy could well be an increase in the funds rate; indeed, one member thought that policy should be
firmed at this meeting. However, in the view of most
members, the outlook for both economic activity and
price pressures remained very uncertain, and thus the
timing and magnitude of future policy actions was quite
unclear. Against this backdrop, most members judged
that an unchanged federal funds rate at this meeting
represented an appropriate balancing of the risks to the
economic outlook and was consistent, for now, with a
policy path that would support an eventual decline in
both inflation and unemployment. Nonetheless, members recognized that circumstances could change
quickly and noted that they might need to respond
promptly to incoming information about the evolution
of risks.
At the conclusion of the discussion, the Committee
voted to authorize and direct the Federal Reserve Bank
of New York, until it was instructed otherwise, to execute transactions in the System Account in accordance
with the following domestic policy directive:
“The Federal Open Market Committee seeks
monetary and financial conditions that will foster price stability and promote sustainable
growth in output. To further its long-run objectives, the Committee in the immediate future
seeks conditions in reserve markets consistent
with maintaining the federal funds rate at an average of around 2 percent.”
The vote encompassed approval of the statement below to be released at 2:15 p.m.:
“The Federal Open Market Committee decided
today to keep its target for the federal funds rate
at 2 percent.
Recent information indicates that overall economic activity continues to expand, partly reflecting some firming in household spending.
However, labor markets have softened further
and financial markets remain under considerable
stress. Tight credit conditions, the ongoing
housing contraction, and the rise in energy
prices are likely to weigh on economic growth
over the next few quarters.
_
The Committee expects inflation to moderate
later this year and next year. However, in light
of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook
remains high.
The substantial easing of monetary policy to
date, combined with ongoing measures to foster
market liquidity, should help to promote moderate growth over time. Although downside risks
to growth remain, they appear to have diminished somewhat, and the upside risks to inflation
and inflation expectations have increased. The
Committee will continue to monitor economic
and financial developments and will act as
needed to promote sustainable economic growth
and price stability.”
Votes for this action: Messrs. Bernanke, Geithner,
Kohn, Kroszner, and Mishkin, Ms. Pianalto, Messrs.
Plosser, Stern, and Warsh.
Votes against this action: Mr. Fisher.
Mr. Fisher dissented because he preferred an increase
in the target federal funds rate at this meeting. While
the financial system was still frail and downside risks to
growth remained, the risk that inflation would fail to
moderate as expected by the Committee had increased
substantially over the intermeeting period. Relatively
strong demand for oil and other commodities abroad,
as well as increased labor and other operating costs in
the emerging economies, was boosting prices of globally traded goods and services. Mr. Fisher was especially concerned about behavioral changes among business operators that appeared to be accommodating
inflationary pressures. In particular, firms increasingly
appeared to be planning to pass through their higher
input costs to final goods prices in order to protect
their profit margins. Overall, Mr. Fisher viewed inflation expectations as becoming less well anchored. To
help restrain inflation expectations and inflation, Mr.
Fisher felt it would be appropriate for the Committee
to tighten the stance of monetary policy.
In a joint session of the Federal Open Market Committee and the Board of Governors, meeting participants
turned to a consideration of policy issues regarding
investment banks and other primary securities dealers.
Participants discussed the financial activities and condition of primary dealers as well as the objectives of, pro-
Minutes of the Meeting of June 24-25, 2008
cedures for, and experience to date in administering the
Primary Dealer Credit Facility (PDCF) and the Term
Securities Lending Facility (TSLF). (The PDCF and
the TSLF had been established in March in response to
unusual and exigent conditions in financial markets.)
In view of the continuing significant strains in financial
markets, participants also discussed the possibility of
extending the PDCF and the TSLF past year-end. In
addition, they reviewed progress in negotiations with
staff of the Securities and Exchange Commission regarding a memorandum of understanding intended to
govern arrangements for sharing information on broker-dealers and for cooperation in the supervision of
primary dealers. Finally, participants exchanged views
on longer-run issues regarding appropriate arrangements for supervision and regulation of investment
banks and other securities dealers and for the access of
such firms to central bank liquidity, as well as on possi-
Page 9
ble measures to strengthen financial market functioning
and thus enhance financial stability.
It was agreed that the next meeting of the Committee
would be held on Tuesday, August 5, 2008.
The meeting adjourned at 1:15 p.m.
Notation Vote
By notation vote completed on May 20, 2008, the
Committee unanimously approved the minutes of the
FOMC meeting held on April 29-30, 2008.
_____________________________
Brian F. Madigan
Secretary
Page 1
Summary of Economic Projections
In conjunction with the June 2008 FOMC meeting, the
members of the Board of Governors and the presidents of the Federal Reserve Banks, all of whom participate in deliberations of the FOMC, provided projections for economic growth, unemployment, and inflation in 2008, 2009, and 2010. Projections were based
on information available through the conclusion of the
June meeting, on each participant’s assumptions regarding a range of factors likely to affect economic outcomes, and on his or her assessment of appropriate
monetary policy. “Appropriate monetary policy” is
defined as the future policy that, based on current information, is deemed most likely to foster outcomes
for economic activity and inflation that best satisfy the
participant’s interpretation of the Federal Reserve’s
dual objectives of maximum employment and price
stability.
FOMC participants generally expected that, over the
remainder of this year, output would expand at a pace
appreciably below its trend rate, owing primarily to
continued weakness in housing markets, the substantial
rise in energy prices in recent months, and the reduction in the availability of household and business credit
resulting from continued strains in financial markets.
As indicated in table 1 and figure 1, output growth further ahead was projected to pick up sufficiently to begin to reverse some of the increase in the unemployment rate by 2010. In light of the recent surge in the
prices of oil and agricultural commodities, total inflation was expected to rise further in coming months and
to be elevated for 2008 as a whole. However, many
participants expected that persistent economic slack
and a flattening out of energy and other commodity
prices in line with futures market prices would cause
overall inflation to decline noticeably in 2009 and 2010.
Most participants judged that greater-than-normal uncertainty surrounded their projections for both output
growth and inflation. A significant majority of participants viewed the risks to their forecasts for output
growth as weighted to the downside, and a similar
number saw the risks to the inflation outlook as skewed
to the upside.
The Outlook
The central tendency of participants’ projections for
real GDP growth in 2008, at 1.0 percent to 1.6 percent,
was noticeably higher than the central tendency of the
projections provided in conjunction with the April
FOMC meeting, which was 0.3 percent to 1.2 percent.
The upward revision to the 2008 outlook stemmed
primarily from better-than-expected data on consumer
and business spending received between the April and
June FOMC meetings. Nonetheless, several participants noted that the recent firmness in consumer
spending could well prove transitory and that the ongoing housing market correction, tight credit conditions,
and elevated energy prices would damp domestic demand in the second half of this year. Still, the substantial easing of monetary policy since last year and the
continued strength in exports should help to support
economic growth; in addition, strains had eased somewhat in some financial markets since April. Real GDP
growth was expected to increase in 2009 as the adjustment in the housing sector ran its course, financial
markets gradually resumed more-normal functioning,
and the downward pressure on real incomes stemming
from increases in energy and food prices in the first
half of 2008 began to fade. In 2010, economic activity
was projected to expand at or a little above participants’
estimates of the rate of trend growth.
With output growth continuing to run below trend in
the second half of 2008, most participants expected
that the unemployment rate would move up somewhat
over the remainder of this year. The central tendency
of participants’ projections for the average rate of unemployment in the fourth quarter of 2008 was 5.5 percent to 5.7 percent, unchanged from the central tendency of projections that were provided in conjunction
with the April FOMC meeting and consistent with
some slack in resource utilization. The central tendency of participants’ projections was for the unemployment rate to stabilize in 2009 and to edge down in
2010 as output and employment growth pick up.
The surge in the prices of oil and agricultural commodities since April led participants to revise up noticeably their projections for total inflation in the near
term. However, the central tendency of participants’
projections for core PCE inflation in 2008 was 2.2 percent to 2.4 percent, unchanged from the central tendency in April, as lower-than-expected rates of core
inflation over recent months offset the expectations of
some pass-through of the recent surge in energy prices
into core inflation over the next few months. Rates of
both overall and core inflation were expected to decline
over the next two years, reflecting a flattening out of
the prices of oil and other commodities consistent with
futures market prices, slack in resource utilization, and
longer-term inflation expectations that were expected
to remain generally well anchored.
Page 2
Federal Open Market Committee
The contour of participants’ projections for output
growth, unemployment, and inflation was importantly
shaped by their judgments about the measured rates of
inflation consistent with the Federal Reserve’s dual
mandate to promote maximum employment and price
stability and about the time horizon over which policy
should aim to attain those rates given current economic
conditions. Most participants judged that it might take
a substantial period of time for output and inflation to
recover from the recent shocks, which had elevated
inflation and damped economic activity. A number of
participants projected that the rate of unemployment
might remain slightly above its longer-run sustainable
level even in 2010; total inflation in 2010 was also
judged likely to continue to run a bit above levels that
most participants saw as consistent with the price stability objective of the Federal Reserve’s dual mandate.
Most participants saw further declines in both unemployment and inflation as likely in the period beyond
the forecast horizon.
Table 1. Economic projections of Federal Reserve Governors
and Reserve Bank presidents, June 2008
Percent
Variable
2008
2009
2010
Central tendency1
Change in real GDP . . . . 1.0 to 1.6 2.0 to 2.8 2.5 to 3.0
April projection . . . .
0.3 to 1.2 2.0 to 2.8 2.6 to 3.1
Unemployment rate . . . . . 5.5 to 5.7
April projection . . . .
5.5 to 5.7
5.3 to 5.8
5.2 to 5.7
5.0 to 5.6
4.9 to 5.5
PCE inflation . . . . . . . . . . 3.8 to 4.2
April projection . . . .
3.1 to 3.4
2.0 to 2.3
1.9 to 2.3
1.8 to 2.0
1.8 to 2.0
Core PCE inflation . . . . .
April projection . . . .
2.2 to 2.4
2.2 to 2.4
2.0 to 2.2
1.9 to 2.1
1.8 to 2.0
1.7 to 1.9
Change in real GDP . . . . . 0.9 to 1.8
April projection . . . .
0.0 to 1.5
Range2
1.9 to 3.0
1.8 to 3.0
2.0 to 3.5
2.0 to 3.4
Unemployment rate . . . . . 5.5 to 5.8
April projection . . . .
5.3 to 6.0
5.2 to 6.1
5.2 to 6.3
5.0 to 5.8
4.8 to 5.9
PCE inflation . . . . . . . . . . 3.4 to 4.6
April projection . . . .
2.8 to 3.8
1.7 to 3.0
1.7 to 3.0
1.6 to 2.1
1.5 to 2.0
Core PCE inflation . . . . .
April projection . . . .
1.8 to 2.3
1.7 to 2.2
1.5 to 2.0
1.3 to 2.0
2.0 to 2.5
1.9 to 2.5
NOTE: Projections of change in real gross domestic product (GDP)
and of inflation are from the fourth quarter of the previous year to the
fourth quarter of the year indicated. PCE inflation and core PCE inflation are the percentage rates of change in, respectively, the price index
for personal consumption expenditures (PCE) and the price index for
PCE excluding food and energy. Projections for the unemployment rate
are for the average civilian unemployment rate in the fourth quarter of
the year indicated. Each participant's projections are based on his or her
assessment of appropriate monetary policy.
1. The central tendency excludes the three highest and three lowest
projections for each variable in each year.
2. The range for a variable in a given year includes all participants'
projections, from lowest to highest, for that variable in that year.
_
Risks to the Outlook
Most participants viewed the risks to their projections
for GDP growth as weighted to the downside and the
associated risks to their projections for the unemployment rate as tilted to the upside. The possibility that
house prices could decline more steeply than anticipated, further reducing households’ wealth, restricting
their access to credit, and eroding the capital of lending
institutions, continued to be perceived as a significant
downside risk to the outlook for economic growth.
Although financial markets had shown some further
improvement since April, conditions in those markets
remained strained; a number of participants also
pointed to the risk that further improvement could be
quite slow and subject to relapse. The potential for
current tight credit conditions to exert an unexpectedly
large restraint on household and business spending was
also viewed as a significant downside risk to economic
activity. An adverse feedback loop, in which weaker
economic activity led to a further worsening of financial conditions, which in turn could damp economic
growth even further, continued to be viewed as a worrisome possibility, though less so than in April. Indeed,
some participants pointed to the apparent resilience of
the U.S. economy in the face of recent financial distress
and suggested that the adverse effects of financial developments on economic activity outside of the housing sector could prove to be more modest than anticipated.
Most participants viewed the risks to their inflation
projections as weighted to the upside. Recent sharp
increases in energy and food prices and the passthrough of dollar depreciation into import prices could
boost inflation in the near term by more than currently
anticipated. Although participants generally assumed
that commodity prices will flatten out, roughly in line
with the trajectory implied by futures prices, the fact
that futures markets had persistently underpredicted
commodity prices in recent experience was viewed as
an upside risk to the outlook for inflation. Participants
also saw a risk that inflation expectations could become
less firmly anchored, particularly if the current elevated
rates of headline inflation did not moderate as quickly
as they expected.
Participants continued to view uncertainty about the
outlook for economic activity as higher than normal,
with a number pointing to uncertainty about the duration and effects of the ongoing financial strains on real
activity. In addition, participants expressed noticeably
more uncertainty about their inflation projections than
they had in January and April, a shift in perception that
they attributed importantly to increased uncertainty
Summary of Economic Projections for the Meeting of June 24-25, 2008
Page 3
Figure 1. Central tendencies and ranges of economic projections, 2008–10
Percent
Change in real GDP
6
Central tendency of projections
Range of projections
5
4
3
Actual
2
1
2003
2004
2005
2006
2007
2008
2009
2010
Percent
Unemployment rate
7
6
5
4
2003
2004
2005
2006
2007
2008
2009
2010
Percent
PCE inflation
4
3
2
1
2003
2004
2005
2006
2007
2008
2009
2010
Percent
Core PCE inflation
4
3
2
1
2003
2004
2005
2006
2007
2008
2009
NOTE: Definitions of variables are in the notes to table 1. The data for the actual values of the variables are annual.
2010
Page 4
Federal Open Market Committee
about the future course of energy and food prices and
to greater uncertainty about the extent of pass-through
of changes in those prices into core inflation. (Table 2
provides estimates of forecast uncertainty for real GDP
growth, unemployment, and inflation since 1987.1)
Table 2. Average historical projection error ranges
Percentage points
Variable
2008
2009
2010
........
±0.9
±1.3
±1.4
........
±0.3
±0.7
±1.0
Total consumer prices2 . . . . . .
±0.6
±1.0
±1.0
Change in real
GDP1
rate1
Unemployment
NOTE: Error ranges shown are measured as plus or minus the root
mean squared error of projections that were released in the summer
from 1987 through 2007 for the current and following two years by
various private and government forecasters. As described in the box
“Forecast Uncertainty,” under certain assumptions, there is about a 70
percent probability that actual outcomes for real GDP, unemployment,
and consumer prices will be in ranges implied by the average size of
projection errors made in the past. Further information is in David
Reifschneider and Peter Tulip (2007), “Gauging the Uncertainty of the
Economic Outlook from Historical Forecasting Errors,” Finance and
Economics Discussion Series 2007-60 (Board of Governors of the
Federal Reserve System, November).
1. For definitions, refer to general note in table 1.
2. Measure is the overall consumer price index, the price measure
that has been most widely used in government and private economic
forecasts. Projection is percent change, fourth quarter of the previous
year to the fourth quarter of the year indicated.
Diversity of Participants’ Views
Figures 2.A and 2.B provide more detail on the diversity of participants’ views regarding likely economic
outcomes over the projection period. The dispersion
of participants’ projections for real GDP growth in
2008 was noticeably narrower than in the forecasts
provided in April, reflecting primarily the accumulation
1
The box “Forecast Uncertainty” at the end of this summary discusses the sources and interpretation of uncertainty in economic forecasts and explains the approach
used to assess the uncertainty and risks attending participants’ projections.
_
of data about the actual performance of the economy
in the first half of the year; their views about output
growth in coming quarters and in 2009 continued to
exhibit appreciable dispersion. The dispersion of participants’ projections for real activity next year seemed
largely to reflect differing assessments of the effects of
adverse financial market conditions on economic
growth, the speed with which credit conditions might
improve, and the depth and duration of the correction
in the housing market. Indeed, views differed notably
on the pace at which output and employment would
recover in 2009, with some participants expressing a
concern that growth might be constrained by the persistence of financial strains over a considerable period.
The dispersion of participants’ longer-term projections
was also affected to some degree by differences in their
judgments about the economy’s trend growth rate and
the unemployment rate that would be consistent over
time with maximum employment. The dispersion of
the projections for PCE inflation in the near term reflected in large part differing views on the extent to
which recent increases in energy and food prices would
pass through into higher consumer prices. In addition,
participants held differing views on the degree to which
inflation expectations were anchored and the role that
expectations might play in the inflation process over
the short and medium term. Participants’ inflation projections further ahead were shaped by the views of the
rate of inflation consistent with the Federal Reserve’s
dual objectives and the time it would take to achieve
these goals given current economic conditions and appropriate policy.
Summary of Economic Projections for the Meeting of June 24-25, 2008
Page 5
Figure 2.A. Distribution of participants’ projections for the change in real GDP and for the unemployment rate, 2008–10
Number of participants
Change in real GDP
2008
June projections
April projections
Number of participants
16
Unemployment rate
2008
16
14
June projections
April projections
14
12
12
10
10
8
8
6
6
4
4
2
2
4.8
4.9
0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4
0.1 0.3 0.5 0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9 3.1 3.3 3.5
5.0
5.1
Percent range
5.2
5.4
5.6
5.3
5.5
5.7
Percent range
5.8
5.9
Number of participants
2009
16
Number of participants
2009
16
14
12
12
10
10
8
8
6
6
4
4
2
2
4.8
4.9
5.0
5.1
Percent range
5.2
5.4
5.6
5.3
5.5
5.7
Percent range
5.8
5.9
Number of participants
16
0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4
0.1 0.3 0.5 0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9 3.1 3.3 3.5
Percent range
NOTE: Definitions of variables are in the general note to table 1.
6.2
6.3
14
0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4
0.1 0.3 0.5 0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9 3.1 3.3 3.5
2010
6.0
6.1
6.0
6.1
6.2
6.3
Number of participants
2010
16
14
14
12
12
10
10
8
8
6
6
4
4
2
2
4.8
4.9
5.0
5.1
5.2
5.4
5.6
5.3
5.5
5.7
Percent range
5.8
5.9
6.0
6.1
6.2
6.3
Page 6
Federal Open Market Committee
_
Figure 2.B. Distribution of participants’ projections for PCE inflation and for core PCE inflation, 2008–10
Number of participants
PCE inflation
2008
16
June projections
April projections
14
Number of participants
Core PCE inflation
2008
16
June projections
April projections
14
12
12
10
10
8
8
6
6
4
4
2
2
1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9 3.1 3.3 3.5 3.7 3.9 4.1 4.3 4.5
1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2 4.4 4.6
1.3
1.4
1.5
1.6
Percent range
1.7
1.8
1.9
2.0
2.1
2.2
2.3
2.4
2.5
2.6
Percent range
Number of participants
2009
16
Number of participants
2009
16
14
14
12
12
10
10
8
8
6
6
4
4
2
2
1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9 3.1 3.3 3.5 3.7 3.9 4.1 4.3 4.5
1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2 4.4 4.6
1.3
1.4
1.5
1.6
Percent range
1.7
1.8
1.9
2.0
2.1
2.2
2.3
2.4
2.5
2.6
Percent range
Number of participants
2010
16
1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9 3.1 3.3 3.5 3.7 3.9 4.1 4.3 4.5
1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2 4.4 4.6
Percent range
NOTE: Definitions of variables are in the general note to table 1.
Number of participants
2010
16
14
14
12
12
10
10
8
8
6
6
4
4
2
2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2.0
Percent range
2.1
2.2
2.3
2.4
2.5
2.6
Summary of Economic Projections for the Meeting of June 24-25, 2008
Forecast Uncertainty
The economic projections provided by
the members of the Board of Governors and
the presidents of the Federal Reserve Banks
inform discussions of monetary policy among
policymakers and can aid public understanding of the basis for policy actions. Considerable uncertainty attends these projections,
however. The economic and statistical models
and relationships used to help produce economic forecasts are necessarily imperfect descriptions of the real world. And the future
path of the economy can be affected by myriad unforeseen developments and events.
Thus, in setting the stance of monetary policy,
participants consider not only what appears to
be the most likely economic outcome as embodied in their projections, but also the range
of alternative possibilities, the likelihood of
their occurring, and the potential costs to the
economy should they occur.
Table 2 summarizes the average historical
accuracy of a range of forecasts, including
those reported in past Monetary Policy Reports and those prepared by Federal Reserve
Board staff in advance of meetings of the
Federal Open Market Committee. The projection error ranges shown in the table illustrate the considerable uncertainty associated
with economic forecasts. For example, suppose a participant projects that real gross domestic product (GDP) and total consumer
prices will rise steadily at annual rates of, respectively, 3 percent and 2 percent. If the
uncertainty attending those projections is
similar to that experienced in the past and the
risks around the projections are broadly balanced, the numbers reported in table 2 would
imply a probability of about 70 percent that
actual GDP would expand 2.1 percent to 3.9
percent in the current year, 1.7 percent to 4.3
percent in the second year, and 1.6 percent to
4.4 percent in the third year. The corresponding 70 percent confidence intervals for overall
inflation would be 1.4 percent to 2.6 percent in
the current year and 1.0 percent to 3.0 percent
in the second and third years.
Because current conditions may differ
from those that prevailed on average over history, participants provide judgments as to
whether the uncertainty attached to their projections of each variable is greater than, smaller
than, or broadly similar to typical levels of
forecast uncertainty in the past as shown in
table 2. Participants also provide judgments as
to whether the risks to their projections are
weighted to the upside, downside, or are
broadly balanced. That is, participants judge
whether each variable is more likely to be
above or below their projections of the most
likely outcome. These judgments about the
uncertainty and the risks attending each participant’s projections are distinct from the diversity of participants’ views about the most
likely outcomes. Forecast uncertainty is concerned with the risks associated with a particular projection, rather than with divergences
across a number of different projections.
Page 7
Cite this document
Federal Reserve (2008, June 24). FOMC Minutes. Fomc Minutes, Federal Reserve. https://whenthefedspeaks.com/doc/fomc_minutes_20080625
@misc{wtfs_fomc_minutes_20080625,
author = {Federal Reserve},
title = {FOMC Minutes},
year = {2008},
month = {Jun},
howpublished = {Fomc Minutes, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/fomc_minutes_20080625},
note = {Retrieved via When the Fed Speaks corpus}
}