Risk Management in Monetary Policymaking

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1 EMBARGOED UNTIL TUESDAY, MARCH 5, 219, AT 7:35 A.M.; OR UPON DELIVERY Risk Management in Monetary Policymaking Eric S. Rosengren President & CEO Federal Reserve Bank of Boston National Association of Corporate Directors New England Chapter Boston, Massachusetts March 5, 219

2 Figure 1: U.S. Stock Price Indices January 5, March 1, Index Dow Jones 3 Industrials S&P Jan Mar May Aug Oct Dec Mar-219 Note: Index level January 5, 218=1. Weekly averages. Source: DJ, S&P, WSJ, Haver Analytics

3 Figure 2: International Stock Price Indices January 5, March 1, Index S&P 5 Euro Area STOXX 5 7 Japanese Nikkei 225 Shanghai Composite 6 5-Jan Mar May Aug Oct Dec Mar-219 Note: Index level January 5, 218=1. Weekly averages. Source: S&P, FT, STOXX, Bloomberg Finance L.P., Haver Analytics

4 Figure 3: CBOE Market Volatility Index (VIX) January 5, March 1, Index Jan Mar May Aug Oct Dec Mar-219 Note: Weekly averages. Source: CBOE, WSJ, Haver Analytics

5 Figure 4: Ten-Year Treasury Yield January 5, March 1, Percent Jan Mar May Aug Oct Dec Mar-219 Note: Weekly averages. Source: Federal Reserve Board, Haver Analytics

6 Figure 5: Long-Term Yield Spread and Near-Term Forward Spread January 5, March 1, Percentage Points Yield Spread: 1-Year Treasury Yield minus 2-Year Treasury Yield. Forward Spread: Implied Forward Yield on 3-Month T-Bill 6 Quarters Ahead minus Current 3-Month T-Bill Yield Jan Mar May Aug Oct Dec Mar-219 Note: Weekly averages. Near-term forward spread based on Engstrom and Sharpe methodology as outlined in The Near-Term Forward Yield Spread as a Leading Indicator: A Less Distorted Mirror. Source: Federal Reserve Board, Haver Analytics

7 Figure 6: High-Yield Corporate Bond Spread over Ten-Year U.S. Treasury Yield January 5, March 1, Percentage Points High-Yield Corporate Master II Jan Mar May Aug Oct Dec Mar-219 Note: Weekly averages. Source: ICE/BofA Merrill Lynch, Federal Reserve Board, Haver Analytics

8 Figure 7: Ten-Year Government Bond Yields January 5, March 1, Percent Italy Germany Jan Mar May Aug Oct Dec Mar-219 Note: Weekly averages. Source: Reuters, Haver Analytics

9 Figure 8: Blue Chip Forecast for Real GDP Growth 219:Q1-219:Q4 4 Quarterly Percent Change at Annual Rate Average of 1 Highest Consensus Forecast (Average) Average of 1 Lowest 219:Q1 219:Q2 219:Q3 219:Q4 Source: Blue Chip Economic Indicators, February 1, 219

10 Figure 9: Unemployment Rate by Race and Ethnicity January 29 - January Percent Black or African American Hispanic or Latino Ethnicity White Jan-29 Jan-212 Jan-215 Jan-218 Note: Persons whose ethnicity is identified as Hispanic or Latino may be of any race. Source: BLS, Haver Analytics

11 Figure 1: Initial Claims for Unemployment Insurance January 3, 29 - February 23, Thousands Jan-29 7-Jan Jan Jan-218 Note: Four-week moving average. Source: U.S. Department of Labor, Haver Analytics

12 Figure 11: The Quits Rate January 29 - December Percent Jan-29 Jan-212 Jan-215 Jan-218 Note: The quits rate is the number of quits during the entire month as a percent of total employment. Pictured above is the three-month moving average. Source: BLS, Haver Analytics

13 Figure 12: Wage Growth for Private Industry Workers 29:Q1-218:Q4 4 3 Percent Change from Year Earlier Average Hourly Earnings Employment Cost Index: Wages and Salaries Excluding Incentive Paid Occupations :Q1 212:Q1 215:Q1 218:Q1 Source: BLS, Haver Analytics

14 Figure 13: Employment Cost Index: Wages and Salaries for Private Industry Workers in Selected Industries 29:Q1-218:Q4 5 4 Percent Change from Year Earlier Leisure and Hospitality Transportation and Warehousing Construction :Q1 212:Q1 215:Q1 218:Q1 Source: BLS, Haver Analytics

15 Figure 14: Inflation Rate: Change in Personal Consumption Expenditures (PCE) Price Indices January 29 - December Percent Change from Year Earlier Total PCE Core PCE Jan-29 Jan-212 Jan-215 Jan-218 Note: Core PCE excludes food and energy. Source: BEA, Haver Analytics

16 Figure 15: Inflation Rate: Change in Personal Consumption Expenditures (PCE) Price Indices for Goods and Services January 29 - December Percent Change from Year Earlier PCE - Goods PCE - Services Jan-29 Jan-212 Jan-215 Jan-218 Source: BEA, Haver Analytics

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