FOMC Minutes
Page 1
_____________________________________________________________________________________________
Minutes of the Federal Open Market Committee
June 9–10, 2020
A joint meeting of the Federal Open Market Committee
and the Board of Governors was held by
videoconference on Tuesday, June 9, 2020, at 10:00 a.m.
and continued on Wednesday, June 10, 2020, at
9:00 a.m.1
PRESENT:
Jerome H. Powell, Chair
John C. Williams, Vice Chair
Michelle W. Bowman
Lael Brainard
Richard H. Clarida
Patrick Harker
Robert S. Kaplan
Neel Kashkari
Loretta J. Mester
Randal K. Quarles
Thomas I. Barkin, Raphael W. Bostic, Mary C. Daly,
Charles L. Evans, and Michael Strine, Alternate
Members of the Federal Open Market Committee
James Bullard, Esther L. George, and Eric Rosengren,
Presidents of the Federal Reserve Banks of St.
Louis, Kansas City, and Boston, respectively
James A. Clouse, Secretary
Matthew M. Luecke, Deputy Secretary
Michelle A. Smith, Assistant Secretary
Mark E. Van Der Weide, General Counsel
Michael Held, Deputy General Counsel
Thomas Laubach, Economist
Stacey Tevlin, Economist
Beth Anne Wilson, Economist
Shaghil Ahmed, Marc Giannoni, Trevor A. Reeve,
William Wascher, and Mark L.J. Wright, Associate
Economists
Ann E. Misback, Secretary, Office of the Secretary,
Board of Governors
Matthew J. Eichner,2 Director, Division of Reserve
Bank Operations and Payment Systems, Board of
Governors; Michael S. Gibson, Director, Division
of Supervision and Regulation, Board of
Governors; Andreas Lehnert, Director, Division of
Financial Stability, Board of Governors
Rochelle M. Edge, Deputy Director, Division of
Monetary Affairs, Board of Governors; Michael T.
Kiley, Deputy Director, Division of Financial
Stability, Board of Governors
Jon Faust, Senior Special Adviser to the Chair, Office
of Board Members, Board of Governors
Joshua Gallin, Special Adviser to the Chair, Office of
Board Members, Board of Governors
William F. Bassett, Antulio N. Bomfim, Wendy E.
Dunn, Ellen E. Meade, Chiara Scotti, and Ivan
Vidangos, Special Advisers to the Board, Office of
Board Members, Board of Governors
Linda Robertson, Assistant to the Board, Office of
Board Members, Board of Governors
Brian M. Doyle,3 Senior Associate Director, Division of
International Finance, Board of Governors; Eric
M. Engen, Senior Associate Director, Division of
Research and Statistics, Board of Governors
Edward Nelson4 and Robert J. Tetlow, Senior Advisers,
Division of Monetary Affairs, Board of Governors;
Jeremy B. Rudd, Senior Adviser, Division of
Research and Statistics, Board of Governors
Lorie K. Logan, Manager, System Open Market
Account
Sally Davies, Associate Director, Division of
International Finance, Board of Governors; David
López-Salido, Associate Director, Division of
Monetary Affairs, Board of Governors
The Federal Open Market Committee is referenced as the
“FOMC” and the “Committee” in these minutes.
2 Attended through the discussion of developments in financial markets and open market operations.
3 Attended through the discussion of economic developments
and the outlook, and all of Wednesday’s session.
4 Attended through the discussion of forward guidance, asset
purchases, and yield caps or targets.
1
Page 2
Federal Open Market Committee
_____________________________________________________________________________________________
Burcu Duygan-Bump, Andrew Figura, Shane M.
Sherlund, and Paul A. Smith, Deputy Associate
Directors, Division of Research and Statistics,
Board of Governors; Jeffrey D. Walker,2 Deputy
Associate Director, Division of Reserve Bank
Operations and Payment Systems, Board of
Governors; Paul R. Wood,4 Deputy Associate
Director, Division of International Finance, Board
of Governors
Brian J. Bonis, Etienne Gagnon, and Zeynep Senyuz,
Assistant Directors, Division of Monetary Affairs,
Board of Governors
Matthias Paustian,4 Assistant Director and Chief,
Division of Research and Statistics, Board of
Governors
Penelope A. Beattie,5 Section Chief, Office of the
Secretary, Board of Governors; Dana L. Burnett,
Section Chief, Division of Monetary Affairs, Board
of Governors; Dario Caldara,6 Section Chief,
Division of International Finance, Board of
Governors
Division of International Finance, Board of
Governors
Randall A. Williams, Senior Information Manager,
Division of Monetary Affairs, Board of Governors
James Hebden4 and James M. Trevino,4 Senior
Technology Analysts, Division of Monetary
Affairs, Board of Governors
Andre Anderson, First Vice President, Federal Reserve
Bank of Atlanta
David Altig, Joseph W. Gruber, Anna Paulson, Daleep
Singh, and Christopher J. Waller, Executive Vice
Presidents, Federal Reserve Banks of Atlanta,
Kansas City, Chicago, New York, and St. Louis,
respectively
Edward S. Knotek II, Paolo A. Pesenti, Julie Ann
Remache,2 Samuel Schulhofer-Wohl,2 Robert G.
Valletta, and Nathaniel Wuerffel,2 Senior Vice
Presidents, Federal Reserve Banks of Cleveland,
New York, New York, Chicago, San Francisco,
and New York, respectively
Mark A. Carlson, Senior Economic Project Manager,
Division of Monetary Affairs, Board of Governors;
Canlin Li,4 Senior Economic Project Manager,
Division of International Finance, Board of
Governors
Roc Armenter, Matthew D. Raskin,2 and Patricia
Zobel, Vice Presidents, Federal Reserve Banks of
Philadelphia, New York, and New York,
respectively
David H. Small, Project Manager, Division of
Monetary Affairs, Board of Governors
Robert Lerman,2 Assistant Vice President, Federal
Reserve Bank of New York
Hess T. Chung,4 Group Manager, Division of Research
and Statistics, Board of Governors
Daniel Cooper and John A. Weinberg, Senior
Economists and Policy Advisors, Federal Reserve
Banks of Boston and Richmond, respectively
Michele Cavallo, Bernd Schlusche,4 and Mary Tian,
Principal Economists, Division of Monetary
Affairs, Board of Governors; Maria Otoo, Principal
Economist, Division of Research and Statistics,
Board of Governors
Sriya Anbil,4 Erin E. Ferris, and Fabian Winkler, Senior
Economists, Division of Monetary Affairs, Board
of Governors; David S. Miller,4 Senior Economist,
Division of Research and Statistics, Board of
Governors; Gaston Navarro, Senior Economist,
Attended through the discussion of economic developments
and the outlook.
5
The Chair opened the meeting with an acknowledgment
of the extraordinary and deeply troubling events of the
last two weeks. Injustice, prejudice, and the callous disregard for life had led to social unrest and a sense of despair. The Chair noted that it was incumbent upon the
leaders of the Federal Reserve System to continue to
communicate with force and clarity about the Federal
Reserve’s core values, and to reaffirm its unflinching
commitment to those values in pursuing the Federal Reserve’s mandated goals. In that spirit, the Chair noted
that he intended to offer the following remarks at the
Attended from the discussion of economic developments
and the outlook through the end of Tuesday’s session.
6
Minutes of the Meeting of June 9–10, 2020
Page 3
_____________________________________________________________________________________________
end of the postmeeting press conference. All participants supported the statement affirming the Federal Reserve’s core values and its commitment to do everything
it can to foster racial equality as well as diversity and inclusion both within the Federal Reserve System and in
society more broadly.
I want to acknowledge the tragic events that
have again put a spotlight on the pain of racial
injustice in this country. The Federal Reserve
serves the entire nation. We operate in, and are
part of, many of the communities across the
country where Americans are grappling with
and expressing themselves on issues of racial
equality.
I speak for my colleagues throughout the Federal Reserve System when I say that there is no
place at the Federal Reserve for racism, and
there should be no place for it in our society.
Everyone deserves the opportunity to participate fully in our society and in our economy.
These foundational principles guide us in all we
do, from monetary policy to our focus on diversity and inclusion in our workplace, and to our
work regulating and supervising banks to ensure
fair access to credit around the country. We will
take this opportunity to renew our steadfast
commitment to these principles, making sure
that we are playing our part.
We understand that the work of the Federal Reserve touches communities, families, and businesses across the country. Everything we do is
in service to our public mission. We are committed to using our full range of tools to support
the economy and to help assure that the recovery from this difficult period will be as robust as
possible.
Discussion of Forward Guidance, Asset Purchases,
and Yield Curve Caps or Targets
Participants discussed tools for conducting monetary
policy when the federal funds rate is at its effective lower
bound (ELB). The discussion addressed two topics:
(1) the roles of forward guidance and large-scale asset
purchase programs in supporting the attainment of the
Committee’s maximum-employment and price-stability
goals and (2) in light of the foreign and historical experience with approaches that cap or target interest rates
along the yield curve, whether such approaches could be
used to support forward guidance and complement asset
purchase programs. The staff briefing on the first topic
focused on outcome-based forward guidance for the
federal funds rate—which ties changes in the target
range for the federal funds rate to the achievement of
specified macroeconomic outcomes, such as reaching a
given level of the unemployment rate or inflation—and
asset purchase programs of the kind used during and following the previous recession. The staff presented results from model simulations that suggested that forward guidance and large-scale asset purchases can help
support the labor market recovery and the return of inflation to the Committee’s symmetric 2 percent inflation
goal. The simulations suggested that the Committee
would have to maintain highly accommodative financial
conditions for many years to quicken meaningfully the
recovery from the current severe downturn. The briefing addressed factors that might alter the potency of forward guidance and asset purchase programs, along with
a number of considerations for the design of these actions. The staff cautioned that businesses and households might not be as forward looking as assumed in the
model simulations, which could reduce the effectiveness
of policies that are predicated on influencing expectations about the path of policy several years into the future. Alternatively, prompt and forceful policy actions
by the Committee might help focus the public’s expectations around better outcomes or reduce perceived risks
of worst-case scenarios, which could generate more immediate macroeconomic benefits than those featured in
the staff analysis.
The second staff briefing reviewed the yield caps or targets (YCT) policies that the Federal Reserve followed
during and after World War II and that the Bank of Japan and the Reserve Bank of Australia are currently employing. These three experiences illustrated different
types of YCT policies: During World War II, the Federal Reserve capped yields across the curve to keep
Treasury borrowing costs low and stable; since 2016, the
Bank of Japan has targeted the 10-year yield to continue
to provide accommodation while limiting the potential
for an excessive flattening of the yield curve; and, since
March 2020, the Reserve Bank of Australia has targeted
the three-year yield, a target that is intended to reinforce
the bank’s forward guidance for its policy rate and to influence funding rates across much of the Australian
economy. The staff noted that these three experiences
suggested that credible YCT policies can control government bond yields, pass through to private rates, and, in
the absence of exit considerations, may not require large
central bank purchases of government debt. But the
staff also highlighted the potential for YCT policies to
require the central bank to purchase very sizable
Page 4
Federal Open Market Committee
_____________________________________________________________________________________________
amounts of government debt under certain circumstances—a potential that was realized in the U.S. experience in the 1940s—and the possibility that, under YCT
policies, monetary policy goals might come in conflict
with public debt management goals, which could pose
risks to the independence of the central bank.
In their discussion of forward guidance and large-scale
asset purchases, participants agreed that the Committee
has had extensive experience with these tools, that they
were effective in the wake of the previous recession, that
they have become key parts of the monetary policy
toolkit, and that, as a result, they have important roles to
play in supporting the attainment of the Committee’s
maximum-employment and price-stability goals. Various participants noted that the economy is likely to need
support from highly accommodative monetary policy
for some time and that it will be important in coming
months for the Committee to provide greater clarity regarding the likely path of the federal funds rate and asset
purchases. Participants generally indicated support for
outcome-based forward guidance. A number of participants spoke favorably of forward guidance tied to inflation outcomes that could possibly entail a modest temporary overshooting of the Committee’s longer-run inflation goal but where inflation fluctuations would be
centered on 2 percent over time. They saw this form of
forward guidance as helping reinforce the credibility of
the Committee’s symmetric 2 percent inflation objective
and potentially preventing a premature withdrawal of
monetary policy accommodation. A couple of participants signaled a preference for forward guidance tied to
the unemployment rate, noting that it would be more
credible to focus on labor market outcomes that have
been achieved in the recent past or that—given how
high the unemployment rate currently is—such guidance
would clearly signal a high degree of accommodation for
an extended period. A few others suggested that
calendar-based guidance—which specifies a date beyond
which accommodation could start to be reduced—might
be at least as effective as outcome-based guidance. They
noted that calendar-based guidance had been very effective when the Committee used it in 2011 and 2012 or
that it would be very challenging to provide credible outcome-based guidance in light of the substantial uncertainty surrounding the current economic outlook. Regardless of the specific form of forward guidance, a couple of participants expressed the concern that policies
that effectively committed the Committee to maintaining very low interest rates for a long time could ultimately pose significant risks to financial stability.
Participants agreed that asset purchase programs can
promote accommodative financial conditions by putting
downward pressure on term premiums and longer-term
yields. Several participants remarked that declines in the
neutral rate of interest and in term premiums over the
past decade and prevailing low levels of longer-term
yields would likely act as constraints on the effectiveness
of asset purchases in the current environment and noted
that these constraints were not as acute when the Committee implemented such programs in the wake of the
Global Financial Crisis. These participants noted, however, that large-scale asset purchases could still be beneficial under current circumstances by offsetting potential
upward pressures on longer-term yields or by helping reinforce the Committee’s commitment to maintaining
highly accommodative financial conditions. A few participants questioned the desirability of large-scale asset
purchases following the current purchases to support
market functioning, noting that they likely would lead to
a further considerable expansion of the Federal Reserve’s balance sheet or have potentially adverse implications for financial stability.
In their discussion of the foreign and historical experience with YCT policies and the potential role for such
policies in the United States, nearly all participants indicated that they had many questions regarding the costs
and benefits of such an approach. Among the three episodes discussed in the staff presentation, participants
generally saw the Australian experience as most relevant
for current circumstances in the United States. Nonetheless, many participants remarked that, as long as the
Committee’s forward guidance remained credible on its
own, it was not clear that there would be a need for the
Committee to reinforce its forward guidance with the
adoption of a YCT policy. In addition, participants
raised a number of concerns related to the implementation of YCT policies, including how to maintain control
of the size and composition of the Federal Reserve’s balance sheet, particularly as the time to exit from such policies nears; how to combine YCT policies—which at
least in the Australian case incorporate aspects of datebased forward guidance—with the types of outcomebased forward guidance that many participants favored;
how to mitigate the risks that YCT policies pose to central bank independence; and how to assess the effects of
these policies on financial market functioning and the
size and composition of private-sector balance sheets. A
number of participants commented on additional challenges associated with YCT policies focused on the
longer portion of the yield curve, including how these
policies might interact with large-scale asset purchase
Minutes of the Meeting of June 9–10, 2020
Page 5
_____________________________________________________________________________________________
programs and the extent of additional accommodation
they would provide in the current environment of very
low interest rates. Some of these participants also noted
that longer-term yields are importantly influenced by
factors such as longer-run inflation expectations and the
longer-run neutral real interest rate and that changes in
these factors or difficulties in estimating them could result in the central bank inadvertently setting yield caps or
targets at inappropriate levels. A couple of participants
remarked that an appropriately designed YCT policy that
focused on the short-to-medium part of the yield curve
could serve as a powerful commitment device for the
Committee. These participants noted that, even if market participants currently expect the federal funds rate to
remain at its ELB through the medium term, the introduction of an effective YCT policy could help prevent
those expectations from changing prematurely—as happened during the previous recovery—or that the size of
a large-scale asset purchase program, which also poses
risks to central bank independence, could be reduced by
an effective YCT policy. All participants agreed that it
would be useful for the staff to conduct further analysis
of the design and implementation of YCT policies as
well as of their likely economic and financial effects.
A number of participants emphasized that, when assessing the potential roles that different monetary policy
tools might play to support the attainment of the Committee’s goals, it was important to think about how various policy tools could be used in coordination as part
of the Committee’s overall strategy to achieve its dualmandate objectives. In addition, various participants
noted that clear communications with the public are central to the efficacy of all policy tools and that, therefore,
the Committee should complete its monetary policy
framework review in the near term, including revising
the Statement on Longer-Run Goals and Monetary Policy Strategy. Such a revised statement would communicate to the public how the Committee views its policy
goals and provide additional context to the Committee’s
policy actions.
Developments in Financial Markets and Open Market Operations
The System Open Market Account (SOMA) manager
first discussed developments in financial markets over
the intermeeting period. Risk asset prices were buoyed
by optimism about the potential for increased economic
activity associated with reopenings as parts of the United
States and other countries relaxed lockdown restrictions.
That optimism was reinforced by high-frequency data
suggesting a pickup in economic activity. Market participants also pointed to the suite of U.S. and global policy
measures taken since mid-March as laying a foundation
for the improvement in risk sentiment. Against this
backdrop, staff analysis suggested that equity prices had
been supported by expectations for a strong rebound in
earnings next year, low risk-free rates and positive risk
sentiment. Despite this improvement in risk sentiment,
market participants expected weak overall growth in
2020, and elevated uncertainties in the outlook remained. The manager noted that prospects for adverse
developments regarding the coronavirus (COVID-19)
and the potential for financial strains to amplify recessionary dynamics, and geopolitical developments, including renewed U.S.–China tensions, presented near
term risks to financial markets. Market participants were
also attentive to the recent steepening in the Treasury
yield curve and noted a range of uncertainties in the outlook for longer-term rates.
Regarding expectations for monetary policy, respondents to the Open Market Trading Desk’s surveys suggested that most market participants did not anticipate
policy changes at the June meeting. The target range for
the federal funds rate was expected to remain at the ELB
for at least the next couple of years, although many survey respondents attached some probability to the target
range increasing in 2022. Although the rates implied by
federal funds futures contracts settling next year had
fallen to slightly negative levels in May, survey respondents attached very little probability to the possibility of
negative policy rates.
The manager turned to a discussion of Federal Reserve
operations. Credit facilities, some of which became operational over the period, generally experienced modest
activity in light of broad improvements in credit market
conditions. New usage across many funding operations
and facilities had declined over the intermeeting period
as conditions in funding markets improved. The manager noted that a significant proportion of amounts outstanding under U.S. dollar liquidity swaps and repurchase agreements (repo) reflected term transactions initiated during the period of funding market strains. In
light of the improvement in funding market conditions,
the manager noted that it might be appropriate to make
a modest adjustment to the minimum bid rates on repo
operations in the forthcoming calendar, which would effectively position these operations in a backstop role.
These adjustments were not expected to have any significant effects in short-term funding markets.
Finally, the manager discussed the near-term plans for
purchases of Treasury securities and agency mortgagebacked securities (MBS). Overall, functioning in the
Page 6
Federal Open Market Committee
_____________________________________________________________________________________________
markets for these securities had improved substantially.
In light of these improvements, the Desk had gradually
reduced the pace of purchases over the intermeeting period, to their current levels of $4 billion per day in Treasury securities and $4.5 billion per day in agency MBS.
These purchase amounts were significantly lower than
the peak pace in mid-March and roughly corresponded
to monthly increases in SOMA holdings of approximately $80 billion in Treasury securities and $40 billion
in agency MBS. Continuing to increase holdings at this
pace would likely help sustain the improvements in market functioning, and seemed to be roughly in line with
market expectations for Treasury purchases, and toward
the lower end of expectations for agency MBS purchases, net of reinvestments. In addition, principal payments from agency debt and agency MBS held in the
SOMA portfolio could continue to be reinvested in
agency MBS. Weekly operations in agency commercial
mortgage-backed securities (CMBS) would also be conducted. The Desk was prepared to increase the size or
adjust the composition of Treasury, agency MBS and
agency CMBS purchases as needed to sustain smooth
market functioning in the markets for these securities.
By unanimous vote, the Committee ratified the Desk’s
domestic transactions over the intermeeting period.
There were no intervention operations in foreign currencies for the System’s account during the intermeeting period.
Staff Review of the Economic Situation
The coronavirus outbreak and the measures undertaken
to contain its spread were severely disrupting economic
activity in the United States and abroad. The available
information for the June 9–10 meeting suggested that
U.S. real gross domestic product (GDP) would likely
post a historically large decline in the second quarter.
Labor market conditions improved in May, but these improvements were modest relative to the substantial deterioration seen over the previous two months. Consumer price inflation, as measured by the 12-month percentage change in the price index for personal consumption expenditures (PCE), slowed notably through April,
reflecting the effects of both weak aggregate demand
and low energy prices.
Total nonfarm payroll employment expanded strongly in
May, though by much less than the historic job losses
recorded in April. The unemployment rate moved down
to 13.3 percent in May after soaring to 14.7 percent in
April. As was highlighted by the Bureau of Labor Statistics, these figures likely understated the extent of unemployment; accounting for the unusually large number
of workers who reported themselves as employed but
absent from their jobs would have raised the unemployment rate by 5 percentage points in April and 3 percentage points in May. Both the labor force participation
rate and the employment-to-population ratio increased
in May. Initial claims for unemployment insurance benefits had declined through the last week of May from
their peak in late March, but they still were at a historically elevated level. Average hourly earnings for all employees declined in May after rising sharply in April, but
these fluctuations largely reflected the substantial
changes in the level and composition of employment,
which disproportionately affected lower-wage workers.
The employment cost index for total labor compensation in the private sector increased 2.8 percent over the
12 months ending in March—a period mostly predating
the onset of the pandemic—and was the same as its yearearlier pace.
Total PCE price inflation was only 0.5 percent over the
12 months ending in April, reflecting both weak aggregate demand in recent months and a considerable drop
in consumer energy prices. Prices fell in March and
April in many categories that were affected the most by
social-distancing measures, such as the prices for air
travel and hotel accommodations. Core PCE price inflation, which excludes changes in consumer food and
energy prices, was 1.0 percent over the 12 months ending in April. In contrast, the trimmed mean measure of
12-month PCE price inflation constructed by the Federal Reserve Bank of Dallas was 1.9 percent in April.
The consumer price index (CPI) inched up 0.1 percent
over the 12 months ending in May, while core CPI inflation was 1.2 percent over the same period. Recent readings on survey-based measures of longer-run inflation
expectations were little changed on balance. The University of Michigan Surveys of Consumers measure for
the next 5 to 10 years edged up in May, while the 3-yearahead measure from the Federal Reserve Bank of New
York’s Survey of Consumer Expectations was unchanged. The 10-year measure for PCE price inflation
from the Survey of Professional Forecasters ticked down
in the second quarter. All of these measures of longerrun inflation expectations continued to be near their recent ranges.
Real PCE slumped in April, with declines widespread
across most spending categories. In May, however, light
motor vehicle sales and some other high-frequency indicators of consumer spending turned up, but the levels of
these indicators were mostly still below their levels early
in the year. Real disposable personal income increased
significantly in April, as a marked decline in wage and
Minutes of the Meeting of June 9–10, 2020
Page 7
_____________________________________________________________________________________________
salary income was more than offset by a substantial
boost from government transfer payments due to recent
fiscal policy support; as a result, the personal saving rate
soared. The consumer sentiment measures from both
the Michigan survey and the Conference Board survey
crept up in May but remained below their levels early in
the year.
Real residential investment appeared to be weakening
significantly in the second quarter. Starts and building
permit issuance for single-family homes, along with
starts of multifamily units, dropped sharply in April.
Sales of existing homes contracted markedly in April, although new home sales edged up.
Real business fixed investment continued to tumble in
the second quarter. Nominal new orders and shipments
of nondefense capital goods excluding aircraft decreased
considerably in April. Nominal business spending for
nonresidential structures outside of the drilling and mining sector also fell in April. In addition, the effects of
low crude oil prices were evident in further declines in
the number of crude oil and natural gas rigs in operation
through early June, an indicator of business spending on
structures in the drilling and mining sector.
Total industrial production plunged in April, as many
factories slowed or suspended operation in response to
the coronavirus pandemic. The decline in manufacturing production was widespread across all major industries and was led by a collapse in the output of motor
vehicles and related parts. Output in the mining sector—which includes crude oil extraction—also decreased, reflecting the effects of low crude oil prices.
Total real government purchases appeared to be rising
moderately in the second quarter. Federal defense
spending continued to increase in April, and nondefense
purchases were likely to be boosted in the second quarter by recent fiscal policy measures related to the coronavirus. In contrast, state and local purchases looked to
be declining, as the payrolls of these governments shrank
in April and May, and nominal state and local construction expenditures decreased in April.
The nominal U.S. international trade deficit widened in
both March and April, as exports of goods and services
plunged more than imports. The fall in goods exports
was broad based, with particularly sharp declines in automotive products, industrial supplies, and capital
goods. Goods imports also contracted significantly in
most categories through April, and a near halt of international travel drove a steep decline in exports and imports of services.
Foreign economic activity contracted in the first quarter,
even though most countries abroad introduced strict
social-distancing measures to contain the spread of the
coronavirus only toward the end of the quarter. In
China, where restrictions were largely lifted by the end
of the first quarter, data pointed to a relatively quick rebound in economic activity in the second quarter. Outside of China, indicators suggested that foreign economic activity plummeted further in the second quarter,
notwithstanding some signs of improvement in May as
restrictions started to ease. Inflation rates fell sharply
across most foreign economies in April and May. The
low level of oil prices relative to a year ago contributed
to 12-month inflation rates close to or below zero in
many advanced foreign economies (AFEs).
Staff Review of the Financial Situation
Over the intermeeting period, risk sentiment improved,
on net, as optimism over reopening the economy, potential coronavirus treatments, the unexpectedly positive
May employment situation report, and other indicators
that suggest that economic activity may be rebounding
more than offset concerns arising from otherwise dire
economic data releases, warnings from health experts
that openings may have been premature, and renewed
tensions between the United States and China. Equity
prices rose, and corporate bond spreads narrowed notably. The Treasury yield curve steepened, and the marketimplied expected path of the federal funds rate declined
somewhat. Liquidity conditions continued to improve
in general, but some stress was still evident in several
markets. Financing conditions were still somewhat
strained for lower-rated borrowers and small businesses
even as announcements and implementation of Federal
Reserve facilities during the intermeeting period were
supportive of credit flows. The credit quality of businesses and municipal debt weakened.
The expected path of the federal funds rate for the next
few years, based on a straight read of overnight index
swap quotes, declined a bit and remained close to the
ELB through late 2023. Market-implied forward rates
referring to 2021 and 2022 turned slightly negative for a
few days beginning on May 7, though market commentary suggested that this development did not reflect investors expecting the FOMC to lower the federal funds
rate target range below zero. This view was supported
by Federal Reserve communications that negative interest rates did not appear to be an attractive policy tool.
The Treasury yield curve steepened over the intermeeting period, with 2-year yields little changed while 10- and
30-year yields rose. Longer-term yields were likely
Page 8
Federal Open Market Committee
_____________________________________________________________________________________________
boosted by expectations of heavy upcoming Treasury security issuance as well as some unwinding of safe-haven
demands in connection with improved investor sentiment. The Treasury’s first 20-year bond offering since
1986 was met with solid demand. Changes in inflation
compensation based on Treasury Inflation-Protected
Securities yields were mixed; 5-year inflation compensation rose amid the recent partial rebound in crude oil
prices, while the 5-to-10-year measure edged down. At
the end of the intermeeting period, both measures stood
roughly halfway between their mid-March lows and typical levels seen in recent years.
Broad stock price indexes moved higher. One-month
implied volatility on the S&P 500 index declined somewhat but still stood at the 85th percentile of its distribution since 1990.
Spreads on investment- and
speculative-grade corporate bonds over comparablematurity Treasury yields narrowed considerably but remained at levels similar to those in other periods of notable economic or bond market stress, though well below financial crisis levels.
Over the intermeeting period, financial market functioning appeared to improve in general, although progress
was uneven. Liquidity measures improved in the Treasury market, but off-the-run Treasury securities of all tenors and longer-maturity on-the-run securities remained
less liquid than before the onset of the pandemic.
Agency MBS market functioning had largely recovered,
except for some less liquid parts of the market. Corporate bond market liquidity improved considerably but remained somewhat strained, particularly for speculativegrade bonds. Liquidity in the municipal bond markets
was still below pre-pandemic levels.
Conditions in unsecured short-term funding markets
continued to improve over the intermeeting period, and
spreads on most types of commercial paper and negotiable certificates of deposit narrowed to levels that approached pre-pandemic ranges. Amid better market
conditions, take-up in the emergency liquidity facilities
declined substantially. Heavy demand for Treasury bills
from money market funds held down rates despite an
unprecedented pace of issuance. The effective federal
funds rate was 5 basis points almost every day over the
intermeeting period, and the Secured Overnight Financing Rate averaged 4 basis points. Total outstanding Federal Reserve repos averaged about $170 billion. Amid
improving market functioning, Federal Reserve purchases of Treasury securities and agency MBS were reduced from around $10 billion and $8 billion per day,
respectively, to $4 billion and $4.5 billion per day, respectively, over the intermeeting period.
Risk sentiment in foreign financial markets improved
over the intermeeting period. Further monetary policy
and fiscal policy support in foreign countries, the easing
of coronavirus-related restrictions, and a stronger-thanexpected U.S. May employment report outweighed concerns about otherwise weak global economic data and
the resurgence of U.S.–China tensions. Liquidity in
global dollar funding markets continued to improve,
helped in part by the Federal Reserve’s liquidity programs, and prices of foreign risky assets increased. In
the AFEs, option-implied volatility measures declined
and long-term sovereign bond yields rose moderately,
while fiscal stimulus in Japan and Europe boosted prices
in their respective equity markets. Euro-area peripheral
bond spreads narrowed after the European Commission
proposed that the European Union be given the authority to borrow €750 billion to assist the recovery and the
European Central Bank (ECB) increased the size of its
Pandemic Emergency Purchase Programme. In emerging markets, the rise in oil prices since late April and
overall improvements in investor sentiment boosted asset prices, even as the coronavirus outbreak worsened in
some countries. Outflows from emerging market funds
slowed and then turned into small inflows later in the
period.
The improving risk sentiment also supported several
foreign currencies, and the staff’s broad dollar index fell.
The euro appreciated notably over the period, lifted in
part by the European fiscal and monetary policy communications. The recent rebound in oil prices contributed to a strong appreciation of the Canadian dollar, the
Brazilian real, and the Mexican peso.
Financing conditions for nonfinancial firms eased somewhat over the intermeeting period, though they remained moderately strained for lower-rated borrowers.
Investment-grade corporate bond issuance soared to
record levels in April and remained robust in May, as issuers took advantage of more favorable market conditions following Federal Reserve announcements of two
facilities to support corporate credit markets. Regarding
these facilities, the Secondary Market Corporate Credit
Facility began in mid-May to purchase exchange-traded
funds whose investment objective is to provide broad
exposure to the market for U.S. corporate bonds.
Speculative-grade corporate bond issuance picked up
considerably toward the end of April from very low levels, though it slowed somewhat in May. Commercial and
industrial loans on banks’ books surged again in April,
Minutes of the Meeting of June 9–10, 2020
Page 9
_____________________________________________________________________________________________
largely driven by lending through the Paycheck Protection Program (PPP), especially at smaller banks. Creditline drawdowns continued in April and May, though
drawdowns by large firms slowed considerably from record levels in March.
The credit quality of nonfinancial corporations continued to deteriorate sharply during the intermeeting period. The volume of nonfinancial corporate bond and
leveraged loan downgrades remained very high in April
and May. Defaults in corporate bonds and leveraged
loans increased as well; market analysts projected defaults to increase considerably over the remainder of
2020 and into 2021.
Financing conditions for small businesses tightened
amid widespread continued pandemic-related closures
and reduced operations of small businesses. Lenders indicated that they had tightened loan standards on small
business loans or discontinued lending to such borrowers altogether (other than PPP loans). Financing conditions for state and local governments improved moderately following several Federal Reserve announcements
to support the municipal debt market, but conditions remained somewhat strained for lower-rated states and
municipalities. In the first week of June, the State of Illinois became the first to use the Municipal Liquidity Facility.
Commercial real estate (CRE) lending conditions recovered somewhat during the intermeeting period. Spreads
on triple-A-rated and triple-B-rated non-agency CMBS
declined in May but remained elevated relative to before
the pandemic, and issuance showed signs of recovery in
late April and early May. Federal Reserve purchases of
agency CMBS reportedly helped return spreads on these
securities to their pre-pandemic levels, and issuance in
that market continued to be strong. However, early
signs of credit repayment difficulties emerged in some
CRE sectors.
The volume of mortgage rate locks for home-purchase
loans picked up in mid-May following a material drop in
April. Financing conditions remained tight for borrowers with relatively low credit scores and for those seeking
nonconforming mortgages. In addition, options for
home equity extraction continued to be restricted, as
credit for both home equity lines of credit and cash-out
refinances was limited. Servicers were able to handle the
liquidity strains imposed by forbearance.
The sharp decline in economic activity had also curtailed
the demand for consumer credit. On balance, consumer
credit financing conditions did not appear to be a major
drag on household spending. Issuance of consumer
asset-backed securities resumed in mid-April and in early
May but remained significantly below pre-pandemic levels.
Staff Economic Outlook
The projection for the U.S. economy prepared by the
staff for the June FOMC meeting was downgraded, on
balance, as compared with the April meeting forecast in
response to information on the spread of the coronavirus and changes in the measures undertaken to contain
it both at home and abroad, along with incoming economic data. U.S. real GDP was forecast to show a historically large decline in the second quarter of this year,
and the unemployment rate was expected to be sharply
higher than in the first quarter. The substantial fiscal
policy measures and appreciable support from monetary
policy, along with the Federal Reserve’s liquidity and
lending facilities, were expected to help mitigate the deterioration in current economic conditions and to help
boost the recovery.
The staff continued to judge that the future performance
of the economy would depend importantly on the evolution of the coronavirus outbreak and the measures undertaken to contain it. Under the staff’s baseline assumptions that the current restrictions on social interactions and business operations would continue to ease
gradually this year, real GDP was forecast to rise appreciably and the unemployment rate to decline considerably in the second half of the year, although a complete
recovery was not expected by year-end. Inflation was
projected to weaken this year, reflecting both the deterioration in resource utilization and sizable expected declines in consumer energy prices. Under the baseline assumptions, economic conditions were projected to continue to improve, and inflation to pick back up, over the
next two years.
The staff still observed that the uncertainty related to the
economic effects of the coronavirus pandemic was extremely elevated and that the historical behavior of the
U.S. economy in response to past economic shocks provided limited guidance for making judgments about how
the economy might evolve in the future. In light of the
significant uncertainty and downside risks associated
with the pandemic, including how much the economy
would weaken and how long it would take to recover,
the staff judged that a more pessimistic projection was
no less plausible than the baseline forecast. In this scenario, a second wave of the coronavirus outbreak, with
another round of strict limitations on social interactions
and business operations, was assumed to begin later this
Page 10
Federal Open Market Committee
_____________________________________________________________________________________________
year, leading to a decrease in real GDP, a jump in the
unemployment rate, and renewed downward pressure
on inflation next year. Compared with the baseline, the
disruption to economic activity was more severe and
protracted in this scenario, with real GDP and inflation
lower and the unemployment rate higher by the end of
the medium-term projection.
Participants’ Views on Current Conditions and the
Economic Outlook
In conjunction with this FOMC meeting, participants
submitted their projections of the most likely outcomes
for real GDP growth, the unemployment rate, and inflation for each year from 2020 through 2022 and over the
longer run, based on their individual assessments of appropriate monetary policy—including the path for the
federal funds rate. The longer-run projections represented each participant’s assessment of the rate to which
each variable would be expected to converge, over time,
under appropriate monetary policy and in the absence of
further shocks to the economy. These projections are
described in the Summary of Economic Projections,
which is an addendum to these minutes.
Participants noted that the coronavirus outbreak was
causing tremendous human and economic hardship
across the United States and around the world. The virus and the measures taken to protect public health induced sharp declines in economic activity and a surge in
job losses. Weaker demand and significantly lower oil
prices were holding down consumer price inflation. Financial conditions had improved, in part reflecting policy measures to support the economy and the flow of
credit to U.S. households and businesses.
Participants agreed that lowering the federal funds rate
to its ELB had established more accommodative financial conditions and that the Federal Reserve’s ongoing
purchases of sizable quantities of Treasury securities and
agency MBS had helped restore smooth market functioning to support the economy and the flow of credit
to U.S. households and businesses. The fiscal response
to economic developments had been large and timely
and was providing much needed support for economic
activity. Credit flows and economic activity were also
being supported by the lending facilities established under the authority of section 13(3) of the Federal Reserve
Act with the approval of the Secretary of the Treasury.
Participants judged that the effects of the coronavirus
outbreak and the ongoing public health crisis will weigh
heavily on economic activity, employment, and inflation
in the near term and would pose considerable risks to
the economic outlook over the medium term. Participants agreed that the data for the second quarter would
likely show the largest decline in economic activity in
post–World War II history. Based in part on information from their Districts, participants observed that
the burdens of the present crisis were not falling equally
on all Americans and noted that the rise in joblessness
was especially severe for lower-wage workers, women,
African Americans, and Hispanics. Participants agreed
that recently enacted fiscal policy programs had been delivering valuable direct financial aid to households, businesses, and communities, as well as providing relief to
disadvantaged groups.
Regarding household spending, participants pointed to
information from District contacts, to surveys of consumer behavior, and to high-frequency indicators—such
as credit card transactions, automated teller machine visits, and cellphone data tracking—as suggesting that consumer expenditures may be stabilizing or rebounding
modestly. Limited available sources of standard economic data, such as retail purchases and motor vehicle
sales, also seemed in line with this impression. With supportive monetary policy and payments to households
under the CARES Act (Coronavirus Aid, Relief, and
Economic Security Act), including enhanced unemployment insurance payments, participants expected personal consumption expenditures to grow strongly in the
second half of the year, albeit from very low levels.
However, the recovery in consumer spending was not
expected to be particularly rapid beyond this year, with
voluntary social distancing, precautionary saving, and
lower levels of employment and income restraining the
pace of expansion over the medium term.
Participants noted that levels of uncertainty and risks
perceived by businesses remained high and that these
factors continued to contribute to restraints on capital
expenditures, despite easing in financing conditions
stemming in part from recent policy measures. Some
business contacts pointed to halting improvements in
consumer demand, a dearth in public infrastructure projects due to strained state and local government budget
conditions, or the decline in energy prices as factors
likely to depress business spending. Some participants
also noted reports of firms stating that they have had
some challenges in rehiring employees, in part related to
temporary enhanced unemployment insurance benefits.
Participants generally agreed that practices and developments in public health to address the pandemic would
be critical for ensuring a strong and lasting reopening of
businesses and reducing the likelihood of an outsized
wave of closures, but monetary policy and, especially,
Minutes of the Meeting of June 9–10, 2020
Page 11
_____________________________________________________________________________________________
fiscal policy would play important roles. Nevertheless,
participants concluded that voluntary social distancing
and structural shifts stemming from the pandemic would
likely mean that some proportion of businesses would
close permanently. Noting ongoing changes in the composition of production and the processes by which production takes place, participants suggested that some
business adaptations were likely to endure long after the
coronavirus subsides, resulting in notable dislocation
and sectoral reallocation of firms and workers across industries.
Participants noted that conditions in the energy sector
remained difficult amid still-low oil prices. Several participants anticipated continued low drilling activity, at
least until excess inventories were reduced later this year,
and expressed concern that a wave of bankruptcies in
the energy sector could be forthcoming. In addition, the
agricultural sector continued to be under stress due to
low prices for some farm commodities, reduced ethanol
production, and pandemic-related limitations on production for some food processing plants.
With regard to the labor market, participants remarked
on the surprisingly positive news from the labor market
report for May but emphasized that nearly 20 million
jobs had been lost, on net, since February. Participants
noted that because of misclassification errors in the Current Population Survey, the official unemployment rate
for May likely understated the extent of unemployment;
others observed that government reliance on unemployment insurance as a vehicle for income support under
the CARES Act complicates the interpretation of the
data. Participants also noted that unemployment insurance claims continued to run at a historically elevated
level, but the proportion of laid-off workers who expected to be recalled was unusually large. Taken together, the data suggested that April could turn out to be
the trough of the recession, but participants agreed that
it was too early to draw any firm conclusions.
Prospects for further substantial improvement in the labor market were seen as depending on a sustained reopening of the economy, which in turn depended in large
part on the efficacy of health measures taken to limit the
effects of the coronavirus. On this issue, participants
judged there to be a great deal of uncertainty and expressed concerns about the possibility that an early reopening would contribute to a significant increase of infections. Participants also regarded highly accommodative monetary policy and sustained support from fiscal
policy as likely to be needed to facilitate a durable recov-
ery in labor market conditions. Overall, participants expected that a full recovery in employment would take
some time.
With regard to inflation, participants reiterated their
view that the negative effect from the pandemic on aggregate demand was likely to more than offset any upward pressure from supply constraints so that the overall
effect of the outbreak on prices was seen as disinflationary. Consistent with that interpretation, participants observed the recent negative readings on the monthly CPI
and noted that they anticipated that the 12-month PCE
inflation measure would likely run well below the Committee’s 2 percent objective for some time. Observing
that inflation had been running somewhat below the
Committee’s 2 percent longer-run objective before the
coronavirus outbreak, some participants noted a risk
that long-term inflation expectations might deteriorate.
Participants noted that a highly accommodative stance
of monetary policy would likely be needed for some time
to achieve the 2 percent inflation objective over the
longer run.
Participants commented that there remained an extraordinary amount of uncertainty and considerable risks to
the economic outlook. Participants shared views on
possible outcomes for the reopening of the economy,
the prospects for effective voluntary social distancing,
and the efficacy of public health initiatives for their implications for economic activity and employment. A
number of participants judged that there was a substantial likelihood of additional waves of outbreaks, which,
in some scenarios, could result in further economic disruptions and possibly a protracted period of reduced
economic activity. Other possibilities included economic activity that might recover more quickly if sizable,
widespread outbreaks could be avoided even as households and businesses relax or modify social-distancing
behaviors. Among the other sources of risk noted by
participants were that fiscal support for households,
businesses, and state and local governments might prove
to be insufficient and that foreign economies could
come under greater pressure than anticipated as a result
of the spread of the pandemic abroad. Participants
stressed that measures taken in the areas of health-care
policy and fiscal policy, together with actions by households and businesses, would shape the prospects for a
prompt and timely return of the U.S. economy to more
normal conditions. In addition, participants agreed that
recent actions taken by the Federal Reserve had helped
reduce risks to the economic outlook.
Page 12
Federal Open Market Committee
_____________________________________________________________________________________________
As part of their discussions of longer-run risks, participants noted that in some adverse scenarios, more business closures would occur, and workers would experience longer spells of unemployment that could lead to a
loss of skills that could impair their employment prospects. In addition, to the extent that transmissionmitigation procedures adopted by firms reduced their
productivity, or if the reallocation of industry output resulted in a lasting reduction in business investment, the
longer-run level of potential output could be reduced.
Regarding developments in financial markets, participants agreed that ongoing actions by the Federal Reserve, including those undertaken in collaboration with
the Treasury, had helped ease strains in some financial
markets and supported the flow of credit to households,
businesses, and communities. Measures of market functioning in the markets for Treasury securities and agency
MBS had improved substantially since March. Strains in
short-term funding markets had receded as well, and the
volume of borrowing at many of the Federal Reserve’s
liquidity facilities had moved lower as borrowers returned to market sources of funding. Risk spreads
across a range of fixed-income markets had narrowed as
the intense flight to safety witnessed in financial markets
in the spring ebbed further.
In their consideration of monetary policy at this meeting,
participants reaffirmed that the Federal Reserve was
committed to using its full range of tools to support the
U.S. economy in this challenging time, thereby promoting its maximum-employment and price-stability goals.
In light of their assessment that the ongoing public
health crisis would weigh heavily on economic activity,
employment, and inflation in the near term and posed
considerable risks to the economic outlook over the medium term, all participants judged that it would be appropriate to maintain the target range for the federal
funds rate at 0 to ¼ percent. Keeping the target range
at the ELB would continue to provide support to the
economy and promote the Committee’s maximumemployment and price-stability goals. Participants also
judged that it would be appropriate to maintain the target range for the federal funds rate at its present level
until policymakers were confident that the economy had
weathered recent events and was on track to achieve the
Committee’s maximum-employment and price-stability
goals.
Participants also agreed that, to support the flow of
credit to households and businesses, over coming
months it would be appropriate for the Federal Reserve
to increase its holdings of Treasury securities and agency
MBS and agency CMBS at least at the current pace to
sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. In addition, the Desk would continue to offer large-scale overnight and term repo operations. Participants noted that it would be important to
continue to monitor developments closely and that the
Committee would be prepared to adjust its plans as appropriate.
Participants also commented that the lending facilities
established by the Federal Reserve under the authority
of section 13(3) of the Federal Reserve Act were supporting financial market functioning and the flow of
credit to households, businesses of all sizes, and state
and local governments. Several participants commented
further that it would be important for the Federal Reserve to remain ready to adjust these emergency lending
facilities as appropriate based on its monitoring of financial market functioning and credit conditions.
Participants agreed that the current stance of monetary
policy remained appropriate, but many noted that the
Committee could, at upcoming meetings, further clarify
its intentions with respect to its future monetary policy
decisions as the economic outlook becomes clearer. In
particular, most participants commented that the Committee should communicate a more explicit form of forward guidance for the path of the federal funds rate and
provide more clarity regarding purchases of Treasury securities and agency MBS as more information about the
trajectory of the economy becomes available. A number
of participants judged that it was important for forward
guidance and asset purchases to be structured in a way
that provides the accommodation necessary to support
rapid economic recovery and fosters a durable return of
inflation and inflation expectations to levels consistent
with the Committee’s symmetric 2 percent objective.
Many participants remarked that the completion of the
monetary policy framework review, together with the
announcement of the conclusions arising from the review and the release of a revised Committee statement
on its goals and policy strategy, would help clarify further
how the Committee intends to conduct monetary policy
going forward.
Committee Policy Action
In their discussion of monetary policy for this meeting,
members agreed that the coronavirus outbreak was causing tremendous human and economic hardship across
the United States and around the world. The virus and
the measures taken to protect public health had induced
sharp declines in economic activity and a surge in job
Minutes of the Meeting of June 9–10, 2020
Page 13
_____________________________________________________________________________________________
losses. Consumer price inflation was being held down
by weaker demand and significantly lower oil prices. Financial conditions had improved, in part reflecting policy measures to support the economy and the flow of
credit to U.S. households, businesses, and communities.
Members agreed that the Federal Reserve was committed to using its full range of tools to support the U.S.
economy in this challenging time, thereby promoting its
maximum-employment and price-stability goals.
Members further concurred that the ongoing public
health crisis would weigh heavily on economic activity,
employment, and inflation in the near term and posed
considerable downside risks to the economic outlook
over the medium term. In light of these developments,
members decided to maintain the target range for the
federal funds rate at 0 to ¼ percent. Members noted
that they expected to maintain this target range until they
were confident that the economy had weathered recent
events and was on track to achieve the Committee’s
maximum-employment and price-stability goals.
Members agreed that they would continue to monitor
the implications of incoming information for the economic outlook, including information related to public
health, as well as global developments and muted inflation pressures, and would use the Committee’s tools and
act as appropriate to support the economy. In determining the timing and size of future adjustments to the
stance of monetary policy, members noted that they
would assess realized and expected economic conditions
relative to the Committee’s maximum-employment objective and its symmetric 2 percent inflation objective.
This assessment would take into account a wide range of
information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international
developments.
To support the flow of credit to households and businesses, members agreed that over coming months it
would be appropriate for the Federal Reserve to increase
its holdings of Treasury securities and agency MBS and
agency CMBS at least at the current pace to sustain
smooth market functioning, thereby fostering effective
transmission of monetary policy to broader financial
conditions. In addition, the Desk would continue to offer large-scale overnight and term repo operations.
Members agreed that they would closely monitor developments and be prepared to adjust their plans as appropriate.
At the conclusion of the discussion, the Committee
voted to authorize and direct the Federal Reserve Bank
of New York, until instructed otherwise, to execute
transactions in the SOMA in accordance with the following domestic policy directive, for release at 2:00 p.m.:
“Effective June 11, 2020, the Federal Open
Market Committee directs the Desk to:
Undertake open market operations as necessary to maintain the federal funds rate in
a target range of 0 to ¼ percent.
Increase the System Open Market Account
holdings of Treasury securities, agency
mortgage-backed securities (MBS), and
agency commercial mortgage-backed securities (CMBS) at least at the current pace to
sustain smooth functioning of markets for
these securities, thereby fostering effective
transmission of monetary policy to broader
financial conditions.
Conduct term and overnight repurchase
agreement operations to support effective
policy implementation and the smooth
functioning of short-term U.S. dollar funding markets.
Conduct overnight reverse repurchase
agreement operations at an offering rate of
0.00 percent and with a per-counterparty
limit of $30 billion per day; the per-counterparty limit can be temporarily increased at
the discretion of the Chair.
Roll over at auction all principal payments
from the Federal Reserve’s holdings of
Treasury securities and reinvest all principal
payments from the Federal Reserve’s holdings of agency debt and agency MBS in
agency MBS and all principal payments
from holdings of agency CMBS in agency
CMBS.
Allow modest deviations from stated
amounts for purchases and reinvestments,
if needed for operational reasons.
Engage in dollar roll and coupon swap
transactions as necessary to facilitate settlement of the Federal Reserve’s agency MBS
transactions.”
The vote also encompassed approval of the statement
below for release at 2:00 p.m.:
“The Federal Reserve is committed to using its
full range of tools to support the U.S. economy
in this challenging time, thereby promoting its
maximum employment and price stability goals.
Page 14
Federal Open Market Committee
_____________________________________________________________________________________________
The coronavirus outbreak is causing tremendous human and economic hardship across the
United States and around the world. The virus
and the measures taken to protect public health
have induced sharp declines in economic activity and a surge in job losses. Weaker demand
and significantly lower oil prices are holding
down consumer price inflation. Financial conditions have improved, in part reflecting policy
measures to support the economy and the flow
of credit to U.S. households and businesses.
Reserve will increase its holdings of Treasury securities and agency residential and commercial
mortgage-backed securities at least at the current pace to sustain smooth market functioning,
thereby fostering effective transmission of
monetary policy to broader financial conditions.
In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will closely monitor developments and is
prepared to adjust its plans as appropriate.”
The ongoing public health crisis will weigh
heavily on economic activity, employment, and
inflation in the near term, and poses considerable risks to the economic outlook over the medium term. In light of these developments, the
Committee decided to maintain the target range
for the federal funds rate at 0 to ¼ percent. The
Committee expects to maintain this target range
until it is confident that the economy has weathered recent events and is on track to achieve its
maximum employment and price stability goals.
Voting for this action: Jerome H. Powell, John C.
Williams, Michelle W. Bowman, Lael Brainard, Richard
H. Clarida, Patrick Harker, Robert S. Kaplan, Neel
Kashkari, Loretta J. Mester, and Randal K. Quarles.
The Committee will continue to monitor the
implications of incoming information for the
economic outlook, including information related to public health, as well as global developments and muted inflation pressures, and will
use its tools and act as appropriate to support
the economy. In determining the timing and
size of future adjustments to the stance of monetary policy, the Committee will assess realized
and expected economic conditions relative to its
maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of
information, including measures of labor market conditions, indicators of inflation pressures
and inflation expectations, and readings on financial and international developments.
To support the flow of credit to households and
businesses, over coming months the Federal
Voting against this action: None.
Consistent with the Committee’s decision to leave the
target range for the federal funds rate unchanged, the
Board of Governors voted unanimously to leave the interest rates on required and excess reserve balances at
0.10 percent. The Board of Governors also voted unanimously to approve establishment of the primary credit
rate at the existing level of 0.25 percent, effective
June 11, 2020.
It was agreed that the next meeting of the Committee
would be held on Tuesday–Wednesday, July 28–29,
2020. The meeting adjourned at 10:05 a.m. on June 10,
2020.
Notation Vote
By notation vote completed on May 19, 2020, the Committee unanimously approved the minutes of the Committee meeting held on April 28–29, 2020.
_______________________
James A. Clouse
Secretary
Page 1
_____________________________________________________________________________________________
Summary of Economic Projections
In conjunction with the Federal Open Market Committee (FOMC) meeting held on June 9–10, 2020, meeting
participants submitted their projections of the most
likely outcomes for real gross domestic product (GDP)
growth, the unemployment rate, and inflation for each
year from 2020 to 2022 and over the longer run. Each
participant’s projections were based on information
available at the time of the meeting, together with his or
her assessment of appropriate monetary policy—including a path for the federal funds rate and its longer-run
value—and assumptions about other factors likely to affect economic outcomes. The longer-run projections
represent each participant’s assessment of the value to
which each variable would be expected to converge, over
time, under appropriate monetary policy and in the absence of further shocks to the economy.1 “Appropriate
monetary policy” is defined as the future path of policy
that each participant deems most likely to foster outcomes for economic activity and inflation that best satisfy his or her individual interpretation of the statutory
mandate to promote maximum employment and price
stability.
The current projections for real activity, the labor market, and inflation were substantially weaker than the projections in the December 2019 Summary of Economic
Projections (SEP) because participants revised their economic outlook in light of the effects of the coronavirus
(COVID-19) pandemic and the measures taken to contain it.2 Table 1 and figure 1 provide summary statistics
for the projections; participants’ projections in the current SEP reflected their assumptions about the course of
the pandemic and actions to control its spread. All participants projected that real GDP will contract sharply in
2020 and that the unemployment rate in the final quarter
of the year would be markedly higher than they had projected in December. Almost all participants projected
that real GDP would grow faster than their estimates of
its longer-run normal growth rate in 2021 and 2022 and
that the unemployment rate would decline. Participants
expected that a full economic recovery would take some
time, with almost all participants projecting that the unemployment rate in the final quarter of 2022 would still
be above their estimates of its level in the longer run.
One participant did not submit longer-run projections for
real GDP growth, the unemployment rate, or the federal funds
rate.
1
Similarly, almost all participants projected that total inflation, as measured by the four-quarter percent change
in the price index for personal consumption expenditures (PCE), would be below the FOMC’s 2 percent inflation objective throughout the forecast period. Projections for core PCE inflation, which excludes food and
energy, generally followed a trajectory similar to the projections for total inflation.
As shown in figure 2, almost all participants indicated
that their expectations regarding the evolution of the
economy, relative to the Committee’s objectives of maximum employment and 2 percent inflation, would likely
warrant keeping the federal funds rate at its current level
through at least the end of 2022. The median of participants’ assessments of the longer-run level for the federal
funds rate was unchanged from its value in the December SEP.
Amid uncertainty about the course of the pandemic and
its effects on the economy, all participants regarded the
uncertainties around their projections as higher than the
average over the past 20 years. In addition, a substantial
majority of participants assessed the risks to their outlook for real GDP growth as weighted to the downside
and the risks to their unemployment rate projections as
weighted to the upside. The risks to inflation projections
were judged as weighted to the downside by a substantial
majority of participants; no participant assessed the risks
to his or her inflation outlook as weighted to the upside.
The Outlook for Real GDP Growth and the Unemployment Rate
As illustrated in figure 3.A, which shows the distributions of participants’ projections for real GDP growth
from 2020 to 2022 and in the longer run, all participants
projected that real GDP will decline in 2020, a development that reflects the coronavirus outbreak and the
measures undertaken to contain its spread. The projections ranged from a decline of 10.0 percent to a decline
of 4.2 percent, with the median projection being a decrease of 6.5 percent. These projections were substantially weaker than those from the December SEP when
real GDP was expected to expand this year at close to
participants’ estimates of its longer-run rate. Current ex-
The preceding SEP occurred in December 2019. Because of
the extraordinary circumstances surrounding the March 2020
FOMC meeting, participants did not submit quarterly economic projections at that meeting.
2
Page 2
Federal Open Market Committee
____________________________________________________________________________________________________________________________________________________________
_____________________________________________________________________________________________
Table 1. Economic projections of Federal Reserve Board members and Federal Reserve Bank presidents,
under their individual assumptions of projected appropriate monetary policy, June 2020
Percent
Central Tendency2
Median1
Range3
Variable
2020
2021
2022
Longer
run
2020
2021
2022
Longer
run
2020
2021
2022
Longer
run
Change in real GDP
December projection
-6.5
2.0
5.0
1.9
3.5
1.8
1.8
1.9
-7.6– -5.5
2.0–2.2
4.5–6.0
1.8–2.0
3.0–4.5
1.8–2.0
1.7–2.0
1.8–2.0
-10.0– -4.2
1.8–2.3
-1.0–7.0
1.7–2.2
2.0–6.0
1.5–2.2
1.6–2.2
1.7–2.2
Unemployment rate
December projection
9.3
3.5
6.5
3.6
5.5
3.7
4.1
4.1
9.0–10.0
3.5–3.7
5.9–7.5
3.5–3.9
4.8–6.1
3.5–4.0
4.0–4.3
3.9–4.3
7.0–14.0
3.3–3.8
4.5–12.0
3.3–4.0
4.0–8.0
3.3–4.1
3.5–4.7
3.5–4.5
PCE inflation
December projection
0.8
1.9
1.6
2.0
1.7
2.0
2.0
2.0
0.6–1.0
1.8–1.9
1.4–1.7
2.0–2.1
1.6–1.8
2.0–2.2
2.0
2.0
0.5–1.2
1.7–2.1
1.1–2.0
1.8–2.3
1.4–2.2
1.8–2.2
2.0
2.0
Core PCE inflation4
December projection
1.0
1.9
1.5
2.0
1.7
2.0
0.9–1.1
1.9–2.0
1.4–1.7
2.0–2.1
1.6–1.8
2.0–2.2
0.7–1.3
1.7–2.1
1.2–2.0
1.8–2.3
1.2–2.2
1.8–2.2
0.1
1.6
0.1
1.9
0.1
2.1
0.1
1.6–1.9
0.1
1.6–2.1
0.1
1.9–2.6
0.1
1.6–1.9
0.1
1.6–2.4
0.1–1.1
1.6–2.9
Memo: Projected
appropriate policy path
Federal funds rate
December projection
2.5
2.5
2.3–2.5
2.4–2.8
Note: Projections of change in real gross domestic product (GDP) and projections for both measures of inflation are percent changes 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. Longer-run projections represent each participant’s assessment of the rate to which each
variable would be expected to converge under appropriate monetary policy and in the absence of further shocks to the economy. The projections for the
federal funds rate are the value of the midpoint of the projected appropriate target range for the federal funds rate or the projected appropriate target
level for the federal funds rate at the end of the specified calendar year or over the longer run. The December projections were made in conjunction with
the meeting of the Federal Open Market Committee on December 10–11, 2019. One participant did not submit longer-run projections for the change in
real GDP, the unemployment rate, or the federal funds rate in conjunction with the December 10–11, 2019, meeting, and one participant did not submit
such projections in conjunction with the June 9–10, 2020, meeting. No projections were submitted in conjunction with the March 2020 FOMC meeting.
1. For each period, the median is the middle projection when the projections are arranged from lowest to highest. When the number of projections
is even, the median is the average of the two middle projections.
2. The central tendency excludes the three highest and three lowest projections for each variable in each year.
3. The range for a variable in a given year includes all participants’ projections, from lowest to highest, for that variable in that year.
4. Longer-run projections for core PCE inflation are not collected.
2.0–3.0
2.0–3.3
Summary of Economic Projections of the Meeting of June 9–10, 2020
Page 3
_____________________________________________________________________________________________
Figure 1. Medians, central tendencies, and ranges of economic projections, 2020–22 and over the longer run
Percent
Change in real GDP
8
6
4
2
Actual
0
−2
−4
Median of projections
Central tendency of projections
Range of projections
−6
−8
−10
2015
2016
2017
2018
2019
2020
2021
2022
Longer
run
Percent
Unemployment rate
16
14
12
10
8
6
4
2
2015
2016
2017
2018
2019
2020
2021
2022
Longer
run
Percent
PCE inflation
3
2
1
0
2015
2016
2017
2018
2019
2020
2021
2022
Longer
run
Percent
Core PCE inflation
3
2
1
0
2015
2016
2017
2018
2019
2020
2021
2022
Longer
run
Note: Definitions of variables and other explanations are in the notes to table 1. The data for the actual values
of the variables are annual.
Page 4
Federal Open Market Committee
_____________________________________________________________________________________________
Figure 2. FOMC participants’ assessments of appropriate monetary policy: Midpoint of target range
or target level for the federal funds rate
Percent
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2020
2021
2022
Longer run
Note: Each shaded circle indicates the value (rounded to the nearest 1/8 percentage point) of an individual
participant’s judgment of the midpoint of the appropriate target range for the federal funds rate or the appropriate
target level for the federal funds rate at the end of the specified calendar year or over the longer run. One participant
did not submit longer-run projections for the federal funds rate.
Summary of Economic Projections of the Meeting of June 9–10, 2020
Page 5
___________________________________________________________________________________________________________________________________________________________________________
_____________________________________________________________________________________________
Figure 3.A. Distribution of participants’ projections for the change in real GDP, 2020–22 and over the longer run
Number of participants
2020
−10.0−
−9.9
−9.4−
−9.3
18
16
14
12
10
8
6
4
2
June projections
December projections
−8.8−
−8.7
−8.2−
−8.1
−7.6−
−7.5
−7.0−
−6.9
−6.4−
−6.3
−5.8−
−5.7
−5.2−
−5.1
−4.6−
−4.5
−4.0−
−3.9
−3.4−
−3.3
−2.8−
−2.7
−2.2−
−2.1
−1.6−
−1.5
−1.0−
−0.9
−0.4−
−0.3
0.2−
0.3
0.8−
0.9
1.4−
1.5
2.0−
2.1
2.6−
2.7
3.2−
3.3
3.8−
3.9
4.4−
4.5
5.0−
5.1
5.6−
5.7
6.2−
6.3
6.8−
6.9
Percent range
Number of participants
18
16
14
12
10
8
6
4
2
2021
−10.0−
−9.9
−9.4−
−9.3
−8.8−
−8.7
−8.2−
−8.1
−7.6−
−7.5
−7.0−
−6.9
−6.4−
−6.3
−5.8−
−5.7
−5.2−
−5.1
−4.6−
−4.5
−4.0−
−3.9
−3.4−
−3.3
−2.8−
−2.7
−2.2−
−2.1
−1.6−
−1.5
−1.0−
−0.9
−0.4−
−0.3
0.2−
0.3
0.8−
0.9
1.4−
1.5
2.0−
2.1
2.6−
2.7
3.2−
3.3
3.8−
3.9
4.4−
4.5
5.0−
5.1
5.6−
5.7
6.2−
6.3
6.8−
6.9
Percent range
Number of participants
18
16
14
12
10
8
6
4
2
2022
−10.0−
−9.9
−9.4−
−9.3
−8.8−
−8.7
−8.2−
−8.1
−7.6−
−7.5
−7.0−
−6.9
−6.4−
−6.3
−5.8−
−5.7
−5.2−
−5.1
−4.6−
−4.5
−4.0−
−3.9
−3.4−
−3.3
−2.8−
−2.7
−2.2−
−2.1
−1.6−
−1.5
−1.0−
−0.9
−0.4−
−0.3
0.2−
0.3
0.8−
0.9
1.4−
1.5
2.0−
2.1
2.6−
2.7
3.2−
3.3
3.8−
3.9
4.4−
4.5
5.0−
5.1
5.6−
5.7
6.2−
6.3
6.8−
6.9
Percent range
Number of participants
18
16
14
12
10
8
6
4
2
Longer run
−10.0−
−9.9
−9.4−
−9.3
−8.8−
−8.7
−8.2−
−8.1
−7.6−
−7.5
−7.0−
−6.9
−6.4−
−6.3
−5.8−
−5.7
−5.2−
−5.1
−4.6−
−4.5
−4.0−
−3.9
−3.4−
−3.3
−2.8−
−2.7
−2.2−
−2.1
−1.6−
−1.5
−1.0−
−0.9
Percent range
Note: Definitions of variables and other explanations are in the notes to table 1.
−0.4−
−0.3
0.2−
0.3
0.8−
0.9
1.4−
1.5
2.0−
2.1
2.6−
2.7
3.2−
3.3
3.8−
3.9
4.4−
4.5
5.0−
5.1
5.6−
5.7
6.2−
6.3
6.8−
6.9
Page 6
Federal Open Market Committee
_____________________________________________________________________________________________
pectations were generally for economic activity to recover during the next couple of years. Almost all participants expected that the rate of real GDP growth in 2021
and 2022 would be above their estimates of its longerrun pace, with the median projections being 5.0 percent
and 3.5 percent, respectively. The distribution of estimates of real GDP growth in the longer run was little
changed from the December SEP, although the median
projection ticked down to 1.8 percent.
The distributions of participants’ projections for the unemployment rate from 2020 to 2022 and in the longer
run are shown in figure 3.B. Reflecting the effects of the
pandemic, the projections for the unemployment rate
were revised up considerably throughout the forecast
period relative to the December SEP. The projections
for the unemployment rate in the final quarter of this
year ranged from 7.0 to 14.0 percent, with a median of
9.3 percent. For the final quarter of 2021, the projections for the unemployment rate ranged from 4.5 to
12.0 percent, with the median being 6.5 percent. The
width of the ranges of the forecasts for the unemployment rate in the final quarters of this year and next year
were 7.0 percentage points and 7.5 percentage points, respectively—more than three times the widest ranges for
forecasts of similar horizons that were submitted from
2007 to 2009. This unusually wide range of projections
highlighted the challenges of assessing the economic
damage caused by the pandemic and of forecasting the
recovery in the labor market. The median projection for
the unemployment rate in the final quarter of 2022, at
5.5 percent, was above the median estimate of the
longer-run normal rate of unemployment of 4.1 percent.
Indeed, almost all participants who submitted longerrun projections expected that the unemployment rate in
the final quarter of 2022 would still be above their estimates of the longer-run value. Participants pointed to a
number of factors to explain the persistence of labor
market slack, including the continuation of voluntary social distancing, unusual disruptions to labor markets, and
the need for businesses to restructure supply chains and
other aspects of their operations. The distribution of
estimates for the longer-run unemployment rate was little changed from the December SEP.
The Outlook for Inflation
Figures 3.C and 3.D show the distributions of participants’ projections for total and core PCE inflation from
2020 to 2022 and in the longer run. All participants revised down their projections for inflation in 2020 relative
to their December projections. Participants expected
that, in 2020, total inflation would be between 0.5 and
1.2 percent, while core inflation would be between
Table 2. Average historical projection error ranges
Percentage points
Variable
2020
2021
2022
Change in real GDP1 . . . . . . .
±1.3
±1.8
±2.0
±0.4
±1.2
±1.8
±0.7
±1.0
±1.0
±0.7
±2.0
±2.2
Unemployment
rate1
Total consumer
prices2
Short-term interest
.......
.....
rates3
....
NOTE: Error ranges shown are measured as plus or minus the root
mean squared error of projections for 2000 through 2019 that were released in the summer 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, consumer prices, and the federal funds rate will
be in ranges implied by the average size of projection errors made in the
past. For more information, see David Reifschneider and Peter Tulip
(2017), “Gauging the Uncertainty of the Economic Outlook Using Historical Forecasting Errors: The Federal Reserve’s Approach,” Finance
and Economics Discussion Series 2017-020 (Washington: Board of
Governors of the Federal Reserve System, February), https://dx.
doi.org/10.17016/FEDS.2017.020.
1. Definitions of variables are in the general note to 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. Projections are percent changes on a fourth quarter to fourth
quarter basis.
3. For Federal Reserve staff forecasts, measure is the federal funds
rate. For other forecasts, measure is the rate on 3-month Treasury bills.
Projection errors are calculated using average levels, in percent, in the
fourth quarter.
0.7 and 1.3 percent, with median expectations for total
and core inflation of 0.8 percent and 1.0 percent, respectively. In the December SEP, participants had expected
that total inflation would be between 1.7 and 2.3 percent
in 2020. In the current SEP, almost all participants expected the inflation rate to rise over the next two years.
However, the vast majority of participants expected
PCE price inflation in 2022 to fall short of the Committee’s 2 percent inflation objective, with the median projection for total PCE price inflation being 1.7 percent.
Appropriate Monetary Policy
The distributions of participants’ judgments regarding
the appropriate target—or midpoint of the target
range—for the federal funds rate at the end of each year
from 2020 to 2022 and over the longer run are shown in
figure 3.E. With substantial agreement that the unemployment rate would remain above its longer-run level
throughout the forecast period and that inflation would
run below the Committee’s objective of 2 percent, almost all participants projected that it would be appropriate to maintain the target range for the federal funds rate
at 0 to ¼ percent through at least the end of 2022. The
median of participants’ estimates of the longer-run level
of the federal funds rate was unchanged from December
at 2.50 percent, although a few participants revised down
their estimates.
Summary of Economic Projections of the Meeting of June 9–10, 2020
Page 7
___________________________________________________________________________________________________________________________________________________________________________
_____________________________________________________________________________________________
Figure 3.B. Distribution of participants’ projections for the unemployment rate, 2020–22 and over the longer run
Number of participants
2020
3.2−
3.3
18
16
14
12
10
8
6
4
2
June projections
December projections
3.8−
3.9
4.4−
4.5
5.0−
5.1
5.6−
5.7
6.2−
6.3
6.8−
6.9
7.4−
7.5
8.0−
8.1
8.6−
8.7
9.2−
9.3
9.8−
9.9
10.4−
10.5
11.0−
11.1
11.6−
11.7
12.2−
12.3
12.8−
12.9
13.4−
13.5
14.0−
14.1
Percent range
Number of participants
18
16
14
12
10
8
6
4
2
2021
3.2−
3.3
3.8−
3.9
4.4−
4.5
5.0−
5.1
5.6−
5.7
6.2−
6.3
6.8−
6.9
7.4−
7.5
8.0−
8.1
8.6−
8.7
9.2−
9.3
9.8−
9.9
10.4−
10.5
11.0−
11.1
11.6−
11.7
12.2−
12.3
12.8−
12.9
13.4−
13.5
14.0−
14.1
Percent range
Number of participants
18
16
14
12
10
8
6
4
2
2022
3.2−
3.3
3.8−
3.9
4.4−
4.5
5.0−
5.1
5.6−
5.7
6.2−
6.3
6.8−
6.9
7.4−
7.5
8.0−
8.1
8.6−
8.7
9.2−
9.3
9.8−
9.9
10.4−
10.5
11.0−
11.1
11.6−
11.7
12.2−
12.3
12.8−
12.9
13.4−
13.5
14.0−
14.1
Percent range
Number of participants
18
16
14
12
10
8
6
4
2
Longer run
3.2−
3.3
3.8−
3.9
4.4−
4.5
5.0−
5.1
5.6−
5.7
6.2−
6.3
6.8−
6.9
7.4−
7.5
8.0−
8.1
8.6−
8.7
Percent range
Note: Definitions of variables and other explanations are in the notes to table 1.
9.2−
9.3
9.8−
9.9
10.4−
10.5
11.0−
11.1
11.6−
11.7
12.2−
12.3
12.8−
12.9
13.4−
13.5
14.0−
14.1
Page 8
Federal Open Market Committee
_____________________________________________________________________________________________
Figure 3.C. Distribution of participants’ projections for PCE inflation, 2020–22 and over the longer run
Number of participants
2020
June projections
December projections
0.5−
0.6
0.7−
0.8
0.9−
1.0
1.1−
1.2
1.3−
1.4
1.5−
1.6
1.7−
1.8
1.9−
2.0
2.1−
2.2
18
16
14
12
10
8
6
4
2
2.3−
2.4
Percent range
Number of participants
2021
18
16
14
12
10
8
6
4
2
0.5−
0.6
0.7−
0.8
0.9−
1.0
1.1−
1.2
1.3−
1.4
1.5−
1.6
1.7−
1.8
1.9−
2.0
2.1−
2.2
2.3−
2.4
Percent range
Number of participants
2022
18
16
14
12
10
8
6
4
2
0.5−
0.6
0.7−
0.8
0.9−
1.0
1.1−
1.2
1.3−
1.4
1.5−
1.6
1.7−
1.8
1.9−
2.0
2.1−
2.2
2.3−
2.4
Percent range
Number of participants
Longer run
18
16
14
12
10
8
6
4
2
0.5−
0.6
0.7−
0.8
0.9−
1.0
1.1−
1.2
1.3−
1.4
1.5−
1.6
1.7−
1.8
1.9−
2.0
Percent range
Note: Definitions of variables and other explanations are in the notes to table 1.
2.1−
2.2
2.3−
2.4
Summary of Economic Projections of the Meeting of June 9–10, 2020
Page 9
_____________________________________________________________________________________________
Figure 3.D. Distribution of participants’ projections for core PCE inflation, 2020–22
Number of participants
2020
18
16
14
12
10
8
6
4
2
June projections
December projections
0.7−
0.8
0.9−
1.0
1.1−
1.2
1.3−
1.4
1.5−
1.6
1.7−
1.8
1.9−
2.0
2.1−
2.2
2.3−
2.4
Percent range
Number of participants
2021
18
16
14
12
10
8
6
4
2
0.7−
0.8
0.9−
1.0
1.1−
1.2
1.3−
1.4
1.5−
1.6
1.7−
1.8
1.9−
2.0
2.1−
2.2
2.3−
2.4
Percent range
Number of participants
2022
18
16
14
12
10
8
6
4
2
0.7−
0.8
0.9−
1.0
1.1−
1.2
1.3−
1.4
1.5−
1.6
1.7−
1.8
1.9−
2.0
Percent range
Note: Definitions of variables and other explanations are in the notes to table 1.
2.1−
2.2
2.3−
2.4
Page 10
Federal Open Market Committee
_____________________________________________________________________________________________
Figure 3.E. Distribution of participants’ judgments of the midpoint of the appropriate target range for the
federal funds rate or the appropriate target level for the federal funds rate, 2020–22 and over the longer run
Number of participants
2020
18
16
14
12
10
8
6
4
2
June projections
December projections
0.13−
0.37
0.38−
0.62
0.63−
0.87
0.88−
1.12
1.13−
1.37
1.38−
1.62
1.63−
1.87
1.88−
2.12
2.13−
2.37
2.38−
2.62
2.63−
2.87
2.88−
3.12
3.13−
3.37
Percent range
Number of participants
2021
18
16
14
12
10
8
6
4
2
0.13−
0.37
0.38−
0.62
0.63−
0.87
0.88−
1.12
1.13−
1.37
1.38−
1.62
1.63−
1.87
1.88−
2.12
2.13−
2.37
2.38−
2.62
2.63−
2.87
2.88−
3.12
3.13−
3.37
Percent range
Number of participants
2022
18
16
14
12
10
8
6
4
2
0.13−
0.37
0.38−
0.62
0.63−
0.87
0.88−
1.12
1.13−
1.37
1.38−
1.62
1.63−
1.87
1.88−
2.12
2.13−
2.37
2.38−
2.62
2.63−
2.87
2.88−
3.12
3.13−
3.37
Percent range
Number of participants
Longer run
18
16
14
12
10
8
6
4
2
0.13−
0.37
0.38−
0.62
0.63−
0.87
0.88−
1.12
1.13−
1.37
1.38−
1.62
1.63−
1.87
1.88−
2.12
2.13−
2.37
2.38−
2.62
Percent range
Note: Definitions of variables and other explanations are in the notes to table 1.
2.63−
2.87
2.88−
3.12
3.13−
3.37
Summary of Economic Projections of the Meeting of June 9–10, 2020
Page 11
_____________________________________________________________________________________________
Uncertainty and Risk
In assessing the appropriate path for monetary policy,
FOMC participants take account of the range of possible
economic outcomes, the likelihood of those outcomes,
and the potential benefits and costs should they occur.
Participants’ assessments of the level of uncertainty surrounding their individual economic projections relative
to the average level of uncertainty over the past 20 years
are shown in the panels on the left side of figure 4.3 All
participants viewed the current uncertainty surrounding
each of the four economic variables—real GDP growth,
the unemployment rate, total PCE inflation, and core
PCE inflation—as being greater than the average over
the past 20 years, which is the first time this situation has
occurred since the introduction of the SEP in 2007.4
Participants’ assessments of the balance of risks to their
current economic projections are shown in the panels on
the right side of figure 4. A substantial majority of participants judged the risks to their projections for real
GDP growth as weighted to the downside and the risks
to their unemployment rate projections as weighted to
the upside. A substantial majority of participants viewed
the risks to their inflation projections as weighted to the
downside; no participant assessed the risks to his or her
inflation outlook as weighted to the upside.
In discussing the uncertainty and risks surrounding their
economic projections, the course of the pandemic was
generally mentioned as a key source of uncertainty. The
possibilities of second waves of contagion and delays in
As a reference, table 2 provides estimates of the forecast uncertainty for the change in real GDP, the unemployment rate,
and total consumer price inflation over the period from 2000
through 2019. At the end of this summary, the box “Forecast
Uncertainty” discusses the sources and interpretation of uncertainty in the economic forecasts and explains the approach
used to assess the uncertainty and risks attending participants’
projections.
3
developing a vaccine were seen as potential downside
risks to the economic outlook, and faster-thananticipated progress in responding to or treating the
coronavirus were seen as potential upside risks. Participants also mentioned a number of other unknowns and
risk factors related to the outlook, including the extent
of supply-side disruptions; possible changes in household behavior; the degree to which business bankruptcies might cause dislocations; the extent of fiscal policy
support; and possibly depressed foreign demand given
the global nature of the pandemic. Several participants
also expressed concerns about longer-run issues in the
event of a prolonged recession, such as labor market
scarring if the unemployment rate remained elevated and
inflation persistently undershooting the FOMC’s 2 percent inflation objective.
Participants’ assessments of the appropriate future path
of the federal funds rate are also subject to considerable
uncertainty. Because the Committee adjusts monetary
policy in response to actual and prospective developments over time in key economic variables—such as real
GDP growth, the unemployment rate, and inflation—
uncertainty surrounding the projected path for the federal funds rate importantly reflects the uncertainties
about the paths for these economic variables, along with
other factors. As with the macroeconomic variables, the
forecast uncertainty surrounding the appropriate path of
the federal funds rate is substantial.
Previous SEP addendums to the FOMC minutes contained
figures showing the median projections, along with confidence intervals based on historical forecast errors. Because
the level of uncertainty about the economic outlook is currently judged to be higher than its historical average as a result
of uncertainty about the course of the coronavirus and its effects on the economy, these “fan charts” have been omitted
from this addendum.
4
Page 12
Federal Open Market Committee
_____________________________________________________________________________________________
Figure 4. Uncertainty and risks in economic projections
Number of participants
Number of participants
Uncertainty about GDP growth
Risks to GDP growth
June projections
December projections
Lower
18
16
14
12
10
8
6
4
2
Broadly
similar
Higher
June projections
December projections
Weighted to
downside
Broadly
balanced
Number of participants
18
16
14
12
10
8
6
4
2
Weighted to
upside
Number of participants
Uncertainty about the unemployment rate
Risks to the unemployment rate
18
16
14
12
10
8
6
4
2
Lower
Broadly
similar
Higher
18
16
14
12
10
8
6
4
2
Weighted to
downside
Broadly
balanced
Number of participants
Weighted to
upside
Number of participants
Uncertainty about PCE inflation
Risks to PCE inflation
18
16
14
12
10
8
6
4
2
Lower
Broadly
similar
Higher
18
16
14
12
10
8
6
4
2
Weighted to
downside
Broadly
balanced
Number of participants
Weighted to
upside
Number of participants
Uncertainty about core PCE inflation
Risks to core PCE inflation
18
16
14
12
10
8
6
4
2
Lower
Broadly
similar
Higher
18
16
14
12
10
8
6
4
2
Weighted to
downside
Broadly
balanced
Weighted to
upside
Summary of Economic Projections of the Meeting of June 9–10, 2020
Page 13
_____________________________________________________________________________________________
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 the Federal
Reserve Board’s staff in advance of meetings of the Federal Open Market Committee (FOMC). 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
within a range of 1.7 to 4.3 percent in the current year,
1.2 to 4.8 percent in the second year, and 1.0 to 5.0 percent in the third year. The corresponding 70 percent
confidence intervals for overall inflation would be 1.3 to
2.7 percent in the current year and 1.0 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 economic variable is greater than,
smaller than, or broadly similar to typical levels of forecast
uncertainty seen in the past 20 years, as presented in table 2.
That is, participants judge whether each economic
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. As with real activity and inflation, the outlook for the future path of the federal funds
rate is subject to considerable uncertainty. This uncertainty arises primarily because each participant’s assessment of the appropriate stance of monetary policy depends importantly on the evolution of real activity and inflation over time. If economic conditions evolve in an unexpected manner, then assessments of the appropriate setting of the federal funds rate would change from that point
forward. The final line in table 2 shows the error ranges
for forecasts of short-term interest rates. They suggest
that the historical confidence intervals associated with projections of the federal funds rate are quite wide. It should
be noted, however, that these confidence intervals are not
strictly consistent with the projections for the federal funds
rate, as these projections are not forecasts of the most
likely quarterly outcomes but rather are projections of participants’ individual assessments of appropriate monetary
policy and are on an end-of-year basis. However, the forecast errors should provide a sense of the uncertainty
around the future path of the federal funds rate generated
by the uncertainty about the macroeconomic variables as
well as additional adjustments to monetary policy that
would be appropriate to offset the effects of shocks to the
economy.
Cite this document
Federal Reserve (2020, June 9). FOMC Minutes. Fomc Minutes, Federal Reserve. https://whenthefedspeaks.com/doc/fomc_minutes_20200610
@misc{wtfs_fomc_minutes_20200610,
author = {Federal Reserve},
title = {FOMC Minutes},
year = {2020},
month = {Jun},
howpublished = {Fomc Minutes, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/fomc_minutes_20200610},
note = {Retrieved via When the Fed Speaks corpus}
}