Top Interest Rate Headlines 11-30-2011: Déjà Vu? Eurozone Crisis Today vs. 2008 Subprime Crisis

Déjà Vu? Eurozone Crisis Today vs. 2008 Subprime Crisis 
http://jlne.ws/vbykoM

Statement by IMF Managing Director Christine Lagarde at the Conclusion of her Visit to Mexico
http://jlne.ws/rP6kRJ

Dow Surges 490 Points 
http://jlne.ws/rQIBlZ

Chart: Cost of labor in U.S. declined at annual rate of 2.5 percent in third quarter 
http://bit.ly/rCpivK

Tentative Outright Treasury Operation Schedule For December - Federal Reserve Bank of New York 
 http://jlne.ws/hp922J

Egan Jones cuts France to A from AA-
http://jlne.ws/tpy3Gu

CME expects court to rule on Dec. 9 re motion for third interim distribution of customer funds http://jlne.ws/sLDXPM

Black Friday sales end November on a solid note
http://jlne.ws/ts2bF1

Fed's Beige Book finds gradual pickup in activity 
http://jlne.ws/uO1mIt

Investors Weigh Ginnie Mae Mortgage Bond Premiums, Tozer Says 
http://jlne.ws/umoJ8J

How Merkel Can Lead the Euro Zone Out of Crisis 
http://jlne.ws/uqUnW6

EU's Rehn: euro zone will either integrate or slowly fall apart
http://jlne.ws/vU9Zkt

Coordinated central bank action to address pressures in global money markets 
http://jlne.ws/vfwmqr

FRB Press Release On Central Bank Coordinated Action

Press Release

Release Date: November 30, 2011
For release at 8:00 a.m. EST

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.

These central banks have agreed to lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements by 50 basis points so that the new rate will be the U.S. dollar overnight index swap (OIS) rate plus 50 basis points. This pricing will be applied to all operations conducted from December 5, 2011. The authorization of these swap arrangements has been extended to February 1, 2013. In addition, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank will continue to offer three-month tenders until further notice.

As a contingency measure, these central banks have also agreed to establish temporary bilateral liquidity swap arrangements so that liquidity can be provided in each jurisdiction in any of their currencies should market conditions so warrant. At present, there is no need to offer liquidity in non-domestic currencies other than the U.S. dollar, but the central banks judge it prudent to make the necessary arrangements so that liquidity support operations could be put into place quickly should the need arise. These swap lines are authorized through February 1, 2013.

Federal Reserve Actions
The Federal Open Market Committee has authorized an extension of the existing temporary U.S. dollar liquidity swap arrangements with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank through February 1, 2013. The rate on these swap arrangements has been reduced from the U.S. dollar OIS rate plus 100 basis points to the OIS rate plus 50 basis points. In addition, as a contingency measure, the Federal Open Market Committee has agreed to establish similar temporary swap arrangements with these five central banks to provide liquidity in any of their currencies if necessary. Further details on the revised arrangements will be available shortly.

U.S. financial institutions currently do not face difficulty obtaining liquidity in short-term funding markets. However, were conditions to deteriorate, the Federal Reserve has a range of tools available to provide an effective liquidity backstop for such institutions and is prepared to use these tools as needed to support financial stability and to promote the extension of credit to U.S. households and businesses.

Information on Related Actions Being Taken by Other Central Banks
Information on the actions to be taken by other central banks is available on the following websites:

Bank of Canada Leaving the Board

Bank of England Leaving the Board

Bank of Japan (PDF) Leaving the Board

European Central Bank Leaving the Board

Swiss National Bank (PDF) Leaving the Board

Frequently Asked Questions: U.S. Dollar and Foreign Currency Liquidity Swaps

For media inquiries, call             202-452-2955      .

Top Interest Rate Headlines 11-29-2011: S&P downgrades dozens of banks

S&P downgrades dozens of banks
Standard and Poor's downgraded the credit ratings of dozens of banks Tuesday, after applying new criteria to the world's 37 largest financial institutions. Among those to suffer a ratings cut: Bank of America, Citigroup, Goldman Sachs (GS, Fortune 500), Morgan Stanley (MS, Fortune 500), Wells Fargo and JPMorgan Chase (JPM, Fortune 500). Ratings of Bank of America (BAC, Fortune 500), Citigroup, Goldman Sachs and Morgan Stanley dropped to A- from A. S&P maintained a "negative" outlook on those companies.
http://jlne.ws/rD22XQ
 
MF Global Trustee seeks approval of bulk transfer & distribution of up to $2.1 billion
http://jlne.ws/s4tlKq

MF Global trustee asks bankruptcy judge to approve release of up to $2.1 billion to customers http://jlne.ws/t4lQ5K

International Swaps and Derivatives Association: When It Comes To Sovereign CDS, Collateral Is King
http://jlne.ws/v8qXKV

Eurozone ministers OK $10.7 billion Greek loan
http://jlne.ws/rPTcXg

Italy Set for 'Sizeable' Cost Increase at EU8 Billion Bond Sale
http://jlne.ws/w4nkIh

FRBSF Economic Research: Prepayment and Delinquency in the Mortgage Crisis Period 
http://jlne.ws/tO5BG6

Fed’s Yellen Sees Scope for More Easing
http://jlne.ws/vu1QKO

Britain Lowers Economic Growth Forecast
http://jlne.ws/uMocum

5% Returns Will Be 'Upper Echelon' for Years: Gross
http://jlne.ws/rrD5pD

Consumer Confidence Bounces Higher
http://jlne.ws/tCOWyO

ECB to cut rates again, throw lifeline to banks Reuters
http://jlne.ws/v0Z7Cd

Top Interest Rate Headlines 11-28-2011: Central Banks Ease Most Since 2009

Central Banks Ease Most Since 2009
http://jlne.ws/toMUOD

U.S. ready to help Europe with debt crisis: Obama
http://jlne.ws/sjDcVv

Illinois House panel OKs tax breaks for CME, CBOE, Sears
http://jlne.ws/sXOWxe

Milken Institute: U.S. Debt and Deficits: Time to Reverse the Trend
http://jlne.ws/tKHqw5

Judge Blocks Citigroup Settlement With SEC
http://jlne.ws/vRX45e

ISDA Credit Derivatives Determinations Committee Sends SEAT Question to External Review http://jlne.ws/sw6DzO

Bank of Israel Cuts Interest Rate 25bps to 2.75%
http://jlne.ws/tMR81H

Rep. Barney Frank to retire from House
http://jlne.ws/rINWkD

Japan's Nomura slashes Italy exposure by 83 pct
http://jlne.ws/trsj3E

European Commission To Propose New Bank Debt Guarantee Plan-Sources
http://jlne.ws/tfMc25

Moody’s warns on all euro zone debt
http://jlne.ws/uQpUAU

BOE's Fisher says more QE may be needed
http://jlne.ws/tBKTSW

Black Friday Skepticism
http://jlne.ws/sSIlWj

Consumers Pare Back Debt, NY Fed Reports
http://jlne.ws/vWvZp4

Schaeuble Says Euro Fund Needs More Work to Spur Confidence
http://jlne.ws/sC8qX7

Home Sales Up 1.3 Percent In October
http://jlne.ws/sYliq3

Analysis of latest ECB bond buying data with Citibank strategist Peter Goves [Video] 
http://jlne.ws/s7i8W5

Top Interest Rate Headlines 11-25-11: European Commission Green Paper On The Feasibility Of Introducing Stability Bonds

European Commission Green Paper On The Feasibility Of Introducing Stability Bonds
Press Release
The Green Paper published by the European Commission today structures the political debate in the EU on the rationale, pre-conditions and possible options of financing public debt through Stability Bonds. Such common issuance of bonds by the euro-area Member States would imply a significant deepening of Economic and Monetary Union. It would create new means through which governments finance their debt, by offering safe and liquid investment opportunities for savers and financial institutions and by setting up a euro-area wide integrated bond market that matches its US Dollar counterpart in terms of size and liquidity.
http://jlne.ws/u0IcCM 

It really is time to wave goodbye to ‘free’ banking
By Alison Smith - Financial Times
Personal banking, like lunch, is not free. That there is a price tag attached to what may seem a most generous invitation has become a truism. Yet the myth that banks are offering retail customers something for nothing persists to a degree that would be puzzling even if bankers were seen as national treasures.
http://jlne.ws/smkAue

Eurobonds: MEPs Voice Reservations About Commission Proposals
Press Release
MEPs gave a cautious welcome to the three options presented by the Commission for introducing Eurobonds when they met Commissioner Rehn on Wednesday in the Economic and Monetary Affairs Committee. The committee will draw up a resolution on the options tabled. This debate followed another on Tuesday with Commissioners Almunia and Barnier, which focused on draft EU rules on credit rating agencies and plans to recapitalise banks.
http://jlne.ws/twScpo

ICMA Welcomes Invitation To Comment On European Commission Paper On Stability Bonds
Press Release
The International Capital Market Association (ICMA), the leading trade association for the international fixed income markets, has welcomed the invitation to comment on the proposals today in the European Commission’s Green Paper regarding the “Feasibility of introducing Stability Bonds”.
http://jlne.ws/w34YCQ

Hungary May Have to Give in to IMF Conditions for Loan
BusinessWeek
Hungary's government may have to reverse its position on ruling out International Monetary Fund conditions in exchange for financial aid, according to Barclays Plc, Goldman Sachs Group Inc. and Capital Economics Ltd.
http://jlne.ws/t3sa3u

UBS's Ermotti Says No Euro-Region Sovereign Bond Is Risk Free
BusinessWeek
UBS AG Chief Executive Officer Sergio Ermotti said he wouldn't consider bonds of any euro- region country as free from risk as the sovereign-debt crisis intensifies.
http://jlne.ws/sqr4Dx

MF Global Brokerage’s Wind-Down Fees May Hit $100 Million a Year
By Linda Sandler - Bloomberg
Nov. 24 (Bloomberg) -- Fees for liquidating the MF Global Inc. broker-dealer may reach $100 million in a year, based on lawyers’ estimates and costs to wind down two other brokerages, Lehman Brothers Inc. and Bernard Madoff’s firm.
http://jlne.ws/tSjfem

MF's Missing Money Makes You Wonder About Goldman: Jonathan Weil
BusinessWeek
Six months ago the accounting firm PricewaterhouseCoopers LLP said MF Global Holdings Ltd. and its units "maintained, in all material respects, effective internal control over financial reporting as of March 31, 2011." A lot of people who relied on that opinion lost a ton of money.
http://jlne.ws/rQUR2G

Two Banks Repay $210 Million In Tarp Funds, Provide Additional Positive Return On TARP Bank Programs For Taxpayers
Press Release
The U.S. Department of the Treasury announced that the following two financial institutions have repurchased Troubled Asset Relief Program (TARP) Capital Purchase Program (CPP) investments, delivering a total of $210 million in proceeds today for taxpayers.
http://jlne.ws/tqKesr

Banks criticised for treatment of Greek bonds
By Adam Jones, Accountancy Correspondent - Financial Times
The European Union markets regulator has criticised the way that some banks and insurers booked relatively small losses on their Greek government debt holdings earlier this year. The European Securities and Markets Authority on Friday argued that some financial institutions had taken an inappropriate approach to valuing these securities in their results for the first half of 2011.
http://jlne.ws/uiFiv5

Sweden Proposes Higher Capital Ratios for Banks
By CHARLES DUXBURY And JENS HANSEGARD - WSJ
STOCKHOLM—Sweden's government said Friday it is proposing higher capital requirements for its banks, in an effort to increase the stability of the country's financial sector and reduce the economy's vulnerability to Europe's sovereign-debt crisis.
http://jlne.ws/tJI8Bl

November 23, 2011: Euro Zone Unlikely To Survive Intact, Say Top Economists

November 23, 2011

JLN Interest Rates - http://www.jlninterestrates.com


Conversation Starter


Basel Committee on Banking Supervision: Basel III Counterparty Credit Risk - Frequently Asked Questions

The Basel Committee on Banking Supervision has received a number of interpretation questions related to the 16 December 2010 publication of the Basel III regulatory frameworks for capital and liquidity and the 13 January 2011 press release on the loss absorbency of capital at the point of non-viability. To help ensure a consistent global implementation of Basel III, the Committee has agreed to periodically review frequently asked questions and publish answers along with any technical elaboration of the rules text and interpretative guidance that may be necessary.

This document sets out the first set of frequently asked questions that relate to the counterparty credit risk sections of the Basel III rules text. The questions and answers are grouped according to the relevant paragraphs of the rules text.

See the full report here:





SIFMA Market Close Recommendations for US Thanksgiving Day Holiday

SIFMA Recommends Early Market Close on November 25 and a Full Market Close on November 24 for Trading of US Dollar-Denominated Fixed-Income Securities in the US in Observance of the Thanksgiving Day Holiday

New York, N.Y. — SIFMA has confirmed its previous recommendations for an early close at 2:00 p.m., EST, on Friday, November 25, and a full market close on Thursday, November 24 for the trading of US dollar-denominated fixed-income securities in the United States in observance of the Thanksgiving Day Holiday.

These recommendations apply to trading of US dollar-denominated government securities, mortgage- and asset-backed securities, over-the-counter investment-grade and high-yield corporate bonds, municipal bonds and secondary money market trading in bankers’ acceptances, commercial paper and Yankee and Euro certificates of deposit.

The early close will not affect the closing time for settlements.

SIFMA’s recommended early and full market closes are recommendations only; each member firm should decide for itself whether its fixed-income departments remain open for trading. All SIFMA recommendations are subject to change due to market conditions.


MarketsWiki likely to pass 16 million views this weekend
At over 15.9 million page views, MarketsWiki appears to be planning to sneakily roll over to 16 million views before Monday.



**CN: The JLN IR Newsletter is being distributed early this week, as the Thanksgiving holiday falls on Thursday. Happy Thanksgiving to everyone!






Lead Stories

Euro Zone Unlikely To Survive Intact, Say Top Economists
By Andy Bruce, Reuters
The euro zone is unlikely to survive its sovereign debt crisis in current form, according to a majority of leading economists and former policymakers polled by Reuters.
http://jlne.ws/uO4mMn

ECONOMIST: Bernanke Is Going To End Up Bailing Out All Of Europe
Business Insider
Federal Reserve Chairman Ben Bernanke's apologetic take on the Fed's negative role in causing the Great Depression may translate into a willingness to bail out Europe, writes economics blogger James Pethokoukis.
http://jlne.ws/uM27iK

Gross Says Europe Is Top Risk as Fink Sees Danger in German Ploy
BusinessWeek
Bill Gross, manager of the world's largest mutual fund, said Europe poses the biggest risk to the U.S. economy.
http://jlne.ws/u69nCZ

Fed's 2012 Stress Test Recipe: Half Of 2008 Plus A European Blowup
Forbes
Major U.S. banks are required to submit detailed capital plans to Ben Bernanke and the Federal Reserve on an annual basis, and the 2012 model requires a gut-check on just how much pain a firm can take if we get a repeat of the 2008 crisis with a European meltdown thrown in for good measure.
http://jlne.ws/v20ThH

World Bank: China faces Europe risk, soft landing possible
Reuters via Yahoo! News
TOKYO (Reuters) - China's economy faces growing risks from Europe's sovereign debt crisis and from debt held by local Chinese governments but it could engineer a soft landing by easing monetary policy, the World Bank said on Tuesday. In a semi-annual East Asia and Pacific economic update, the World Bank nudged up its 2011 growth forecast for China but expects growth to moderate from next year as ...
http://jlne.ws/tFVOxd

ECB funding demand surges as bank strains build
Reuters via Yahoo! News
FRANKFURT/LONDON (Reuters) - Euro zone banks' demand for central funding surged to a two-year high on Tuesday, and U.S. funds cut their lending to the bloc's banks, tightening a squeeze that looks unlikely to ease this year. Fast-spreading sovereign debt worries have left lending markets virtually frozen and the European Central Bank as the only available funding option for many banks. The ECB's ...
http://jlne.ws/uhcreW

Super Committee Punts Setting Up Bears With Great Field Position
Forbes via Yahoo! News
U.S. stock futures point to a sharply lower open on Wall St. Monday as the congressional supercommittee looks set to announce it was unable to reach a deficit-reduction. Deep differences of opinion over tax and spending reforms made it impossible to strike a compromise, and this defeat will mark another market-negative catalyst from our Federal government. A long impasse over the debt ceiling ...
http://jlne.ws/v54HHb

'Supercommittee'? Superbad
BusinessWeek
Washington fails yet again to reduce the deficit. This time, says Paul M. Barrett, only one party bears the blame
http://jlne.ws/s13Z6j

No deficit deal? No problem ... for Treasury bonds
Los Angeles Times
Treasury yields slid Monday despite the apparent failure of the congressional "super-committee" to come up with more than $1 billion in deficit cuts over the next decade.
http://jlne.ws/siBCTO

Pimco's El-Erian Says U.S. Economic Setting 'Terrifying'
BusinessWeek
Pacific Investment Management Co.'s Chief Executive Officer Mohamed A. El-Erian said U.S. economic conditions are "terrifying" as the nation struggles to recover from recession.
http://jlne.ws/vhq3hl

Congress Passes Budget Measure to Avert Government Shutdown
BusinessWeek
The U.S. Congress gave final approval to a $182 billion budget measure to keep federal agencies operating past tomorrow.
http://jlne.ws/uekcEM

Treasury Gets $12.2M from Warrants - Analyst Blog
Nasdaq
The Treasury Department reported on Friday that after selling the warrants of 17 banks, the department raised $12.2 million. These banks received government support during the financial crisis
http://jlne.ws/tiifZb

Federal Reserve ordering new round of "stress tests" for banks
CBS 19
The Federal Reserve is ordering a new round of stress tests for the nation's biggest banks.
http://jlne.ws/rHqYD8

Federal Reserve minutes reveal debate among members
CNN Money
At their last meeting, Federal Reserve members discussed volatile financial markets, Europe's debt crisis and MF Global's bankruptcy. But in the end, they made no changes to existing policy.
http://jlne.ws/rYBjbh

Federal Reserve officials may move to clarify interest rate policy
Los Angeles Times
Federal Reserve policymakers this month discussed how they could give businesses and investors more information about what might trigger an increase in interest rates, according to minutes of the Nov. 1-2 meeting, but the Fed held off making any changes.
http://jlne.ws/sQgql3

Federal Reserve has started talking about QE3
Nasdaq
Minutes of the Federal Reserve Open Market Committee meeting from November 1-2 have just been released with members urging "additional accommodation." This makes it more likely
http://jlne.ws/uglTEw

Retail groups file suit claiming Federal Reserve didn't follow law in setting debit card fees
Washington Post
NEW YORK - A coalition of retail groups sued the Federal Reserve on Tuesday, claiming the regulator ignored the law by setting too high a cap on the fees that banks can charge merchants for handling debit card purchases. The National Retail Federation and other groups claimed in U.S. District Court in Washington, D.C., that the Fed buckled under pressure from bank lobbyists when it set the cap ...
http://jlne.ws/ufbF2L

Can the U.S. Federal Reserve Help Save Europe's Banks?
http://jlne.ws/sFsnoE via Yahoo! News
The U.S. Federal Reserve has been pumping billions of dollars into the European banking system in recent weeks in an attempt to help stabilize the continent's financial crisis. And while the effort remains small, it is likely to grow in coming days as Europe's banks struggle to find lenders willing to help them service their dollar denominated debts.
http://jlne.ws/vrzHBQ

Dodd-Frank Law May Hinder Crisis Response by Policy Makers
BusinessWeek
Federal Reserve Chairman Ben S. Bernanke and fellow U.S. policy makers may find themselves hampered in restoring financial stability should the European debt crisis spread to America.
http://jlne.ws/s7nsgz

MF Global missing funds may hit $1.2 billion
CNN
More than $1.2 billion in customer funds may be missing from bankrupt brokerage MF Global, nearly twice previous estimates, the trustee administering the firm's bankruptcy said Monday.
http://jlne.ws/s3qxmn

House calls Corzine to testify over MF Global
CNN Money
The House Financial Services Committee has called on former New Jersey governor and MF Global CEO Jon Corzine to give testimony about the widening scandal at the bankrupt brokerage.
http://jlne.ws/tU7zFS

MF Global customers get hope; Corzine asked to testify
Reuters via Yahoo! News
(Reuters) - Former customers of MF Global Holdings Ltd got some good news on Tuesday, as the bankruptcy trustee secured more assets and the CME Group Inc expanded a guarantee to speed the return of frozen funds. Meanwhile, Jon Corzine, who has been publicly silent since resigning as MF Global's chief executive on November 4, was asked to appear before Congress next month to explain how his ...
http://jlne.ws/u3zVXs

CME lifts MF Global guarantee to $550 million
Chicago Sun-Times
The Chicago future markets, under fire from traders for their response to the collapse of MF Global, Tuesday announced a stepped up effort to restore funds to the brokerage's customers.CME Group Inc. said it increased its financial guarantee to MF Global's bankruptcy trustee. The guarantee, previously $250 million, was increased to $550 million.The higher amount will allow the trustee to repay ...
http://jlne.ws/rKwS0Y

Goldman Sachs Sees Signs Of Disinflation: Bernanke's Cue For QE3?
Forbes
Recent data suggest disinflation is here, according to Goldman Sachs' chief economist Jan Hatzius. With disinflation possibly turning into deflation, Fed Chairman Ben Bernanke could be forced to unleash QE3 in coming months to combat falling prices and possibly a slowing economy that could be slipping into recession. Rising oil prices and extremely loose monetary, though, also feed the ...
http://jlne.ws/vpSYbt

U.S. sells 5-year debt at record-low yield
Market Watch
NEW YORK (MarketWatch) -- The Treasury Department sold $35 billion in 5-year notes on Tuesday at a yield of 0.937%, the lowest level on record and below where traders expected the sale to come. Bidders offered to buy 3.15 times the amount of debt sold, the highest since May and above the average of 2.82 times at the last four auctions. Indirect bidders, a group which includes foreign central ...
http://jlne.ws/vyWX3L

AIG Bailout Turns Contentious with Lawsuits Against U.S. Treasury
Yahoo! Contributor Network via Yahoo! News
The Washington Post reports former AIG CEO Hank Greenberg is suing the Treasury Department and the Federal Reserve Bank of New York for $25 billion. The company called Starr International, which owns 12 percent of AIG and is run by Greenberg, filed separate lawsuits Monday on behalf of AIG. The point is to recoup stock losses that have occurred since the federal government bought an 80 percent ...
http://jlne.ws/vIOaCA

France's AAA Status in Tatters as Yields Surge: Euro Credit
BusinessWeek
Investors aren't waiting for Standard & Poor's or Moody's Investors Service to strip France, Europe's second-biggest economy, of its top credit rating.
http://jlne.ws/vogn15

IMF warns Bangladesh on inflation
AFP via Yahoo! News
The International Monetary Fund urged Bangladesh on Monday to tighten monetary policy further to fight runaway inflation and warned that economic growth could undershoot the government's expectations.
http://jlne.ws/sRVzkY

Federal Housing Administration Could be the Next Housing Bailout
US News & World Report
A weak housing market and economy could mean more trouble for the government's mortgage insurer.
http://jlne.ws/rFeFBr

Thomson Reuters Launches World's First Islamic Interbank Rate
Thomson Reuters ONE Finance News via Yahoo! Finance
Thomson Reuters works with leading Islamic finance institutions and banks to provide objective and dedicated benchmark for Shariah-compliant short-term interbank funding in Islamic finance industry New ...
http://jlne.ws/tmMpZA

TED Spread Hits Highest Level Since Crisis
Wall Street Journal Blogs
This shouldn't really shock you, but one measure of bank funding stress has hit its highest level going back to 2009.
http://jlne.ws/ts52AE





Events

Fourteenth Annual International Banking Conference
November 29 - December 1, 2011
Federal Reserve Bank of Chicago holds 14th International Banking Conference
http://jlne.ws/nTDrKO

7th Annual FIA Asia Derivatives Conference
November 29 - December 1, 2011
FIA looks at the futures and options industry in Asia
http://jlne.ws/vkOpsA

Fixed Income Markets 2012
January 24, 2012
Tabb Forum Looks At Changes Ahead And Staying Ahead In Fixed Incomes
http://jlne.ws/snQ3VO








Exchanges, Clearing Houses & MTFs

Eris Exchange Receives FOW Magazine Award for Innovation by an Exchange in the Field of Product Design
PR Newswire
CHICAGO and LONDON, Nov. 22, 2011 /PRNewswire/ -- Eris Exchange, a US-based futures exchange, today announced that it has received the 2011 FOW Award for Best Innovation by an Exchange in the Field of Product Design for North America. The award, which was announced at the FOW...
http://jlne.ws/rHg8Dt

NYPC Awarded "Best Innovation by a Clearinghouse, North America" by Futures and Options World, 2011
PR Newswire
NEW YORK, Nov. 17, 2011 /PRNewswire/ -- New York Portfolio Clearing, LLC (NYPC), the innovative new clearing platform for interest rate futures, today announced that it has been awarded "Best Innovation by a Clearing House, North America," by Futures and Options World (FOW), 2011. Walt...
http://jlne.ws/tAcQDH





Firms & Banks

AIG's Greenberg sues U.S. for $25 billion
CNN
The former head of the American International Group sued the U.S. government for $25 billion on Monday, claiming officials should have bailed out AIG instead of taking it over.
http://jlne.ws/vxpgy8

Pimco Launches Australian Bond ETF
ETF Trends via Yahoo! Finance
The newly launched exchange traded fund that Australian bonds provides investors with exposure to one of the more fiscally sound developed economies that also offers high returns. PIMCO Australia Bond ...
http://jlne.ws/vhM2Lb

Bank of America Settles Countrywide Fraud Claims With Calpers, Investors
Bloomberg
Bank of America Corp. (BAC) settled securities fraud claims by a group of investors including the California Public Employees Retirement System that opted out of a $624 million class-action settlement in 2010.
http://jlne.ws/rvwjTA

Bank of America tangles with Fannie Mae over loans
Boston Globe
Bank of America Corp. has told Fannie Mae it won't cooperate with the mortgage company's new stance on loan buybacks.
http://jlne.ws/tLUVQe

BofA default swaps hit new high
http://jlne.ws/szVxRO

First Midwest Bancorp sells $115 million in debt to repay TARP
Crain's Chicago Business
(Crain's) -The institution becomes the third Chicago-area bank to exit the federal government's bank bailout program.
http://jlne.ws/vj7N82

Citigroup May Need to Pay More to Keep SEC Deal, Lawyers Say
By Bob Van Voris - Bloomberg
Citigroup Inc., whose $285 million settlement with U.S. regulators over a collapsed collateralized debt obligation was faulted by a federal judge as too lenient, may have to pay more money to avoid admitting it did anything wrong, said lawyers following the case.
http://jlne.ws/vHPX4e

JP Morgan to buy MF Global stake in LME - sources
Douwe Miedema - Reuters
J.P. Morgan will soon announce it has bought a 4.7 percent stake in the London Metal Exchange (LME) from defunct U.S. brokerage MF Global, two people familiar with the situation said, making it the exchange's largest shareholder.
http://jlne.ws/stnUku

UBS, Credit Suisse Should Be Broken Up, Ex-UBS Chairman Says
BusinessWeek
UBS AG and Credit Suisse Group AG, Switzerland's biggest banks, should split off their investment banks to regain the trust of investors and clients, former UBS Chairman Peter Kurer said.
http://jlne.ws/u2VpgO

Jefferies CEO Weighing Future as Independent Firm
Charlie Gasparino - FOX Business
Exclusive: As he battles rumors that his firm will be next to fail, Jefferies CEO Richard Handler is weighing whether a sale to a larger player is inevitable.
http://jlne.ws/vGwZMs







Regulators

Kocherlakota Says Fed Focusing on Level of Unemployment May Be 'Dangerous'
Bloomberg
Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said while U.S. unemployment is too high at 9 percent, central bank policies to target a level of joblessness could lead to a jump in inflation.
http://jlne.ws/t4rr1k

Bullard Warns More Stimulus Risks 1970s-Style Inflation
BusinessWeek
Federal Reserve Bank of St. Louis President James Bullard said additional monetary stimulus by the Fed risks fueling inflation similar to three decades ago.
http://jlne.ws/vxnIs0

Romer on Fed, U.S. Economy, Supercommittee Failure
Bloomberg
Nov. 22 (Bloomberg) -- Christina Romer, former head of President Barack Obama's Council of Economic Advisers and a Bloomberg contributing editor, talks about the minutes of the Nov. 1-2 meeting of the Federal Open Market Committee and the outlook for the economy and budget.
http://jlne.ws/ticEnV

Fed's Williams Says Fiscal Aid 'Badly Needed' for Growth
BusinessWeek
Federal Reserve Bank of San Francisco President John Williams called for fiscal aid for the economy, saying government actions beyond Fed easing are imperative for bolstering the recovery and reducing joblessness.
http://jlne.ws/thdhcz

Osborne Said to Favor Low-Rate Bank Loans for Credit-Easing Plan
BusinessWeek
U.K. Chancellor of the Exchequer George Osborne may propose a plan to channel low-cost loans to companies through commercial banks to spur economic growth, said a person with knowledge of the matter.
http://jlne.ws/toWGuO








Global News

South African Inflation Accelerates to Top of 6% Target on Weaker Rand
Bloomberg
South Africa's inflation rate rose to 6 percent in October as food and fuel prices increased, reducing chances the central bank will lower interest rates to support growth in Africa's largest economy.
http://jlne.ws/uuvIzn

German 10-year bond auction a "disaster"
Reuters via Yahoo! News
LONDON (Reuters) - A "disastrous" sale of German benchmark bonds sparked fears on Wednesday the debt crisis was beginning to threaten even Berlin, with the Bundesbank forced to dig deep into its pockets to ensure the auction did not fail. In one of the least successful debt sales by Europe's powerhouse economy since the launch of the single currency, the low returns offered -- just 2 percent ...
http://jlne.ws/vFD96z

London Banks Seen Rigging Rates for Decades Losing Credibility in Markets
Bloomberg
Every workday morning in London, at about 10 o'clock, representatives from 19 banks make a series of decisions that affect financial transactions around the world, from what homeowners pay on their mortgages to the underlying value of credit-default swaps and corporate bonds.
http://jlne.ws/skviJS

Credit Default Swaps as a Scare Tactic in Greece
International Herald Tribune
Behind the scenes, there appears to be some arm-twisting to persuade holders of Greek bonds to accept a restructuring deal.
http://jlne.ws/vDjDI3

Ontario vows to balance budget, despite spending
Reuters via Yahoo! News
TORONTO (Reuters) - The Liberal government of Ontario, Canada's industrial heartland, renewed its vow on Tuesday to eliminate its C$16 billion ($15.4 billion) budget deficit in six years, while also affirming some expensive spending promises made in the recent provincial election. In the Speech from the Throne, which opened the first session of the legislature since the October 6 vote ...
http://jlne.ws/vlCnfS

China To Fine-Tune Monetary Policy, PBoC's Hu Says
Nasdaq
http://jlne.ws/v9vZP8

BOE panel unanimously backed unchanged policy
Market Watch
FRANKFURT (MarketWatch) -- The Bank of England's nine-member Monetary Policy Committee unanimously backed the Nov. 10 decision to leave the key lending rate at 0.5% and the size of the asset-purchase program unchanged at 275 billion pounds ($429.6 billion), according to minutes of the meeting released Wednesday. The MPC in October expanded the asset-purchases, the centerpiece of its quantitative ...
http://jlne.ws/uuuvZQ

Kenya almost-doubles inflation target to 9 pct
Reuters via Yahoo! News
NAIROBI (Reuters) - Kenya's central bank changed another key policy aim by almost-doubling this fiscal year's inflation target to 9 percent, just weeks after being driven to make a huge rate rise to combat soaring inflation and save the plunging shilling. Tuesday's unveiling of the new target, for the year running July to June, followed months of trenchant criticism of the bank for not taking ...
http://jlne.ws/sa0kNm

Nigeria leaves benchmark interest rate at 12 pct
Reuters via Yahoo! News
ABUJA (Reuters) - The Central Bank of Nigeria (CBN) monetary policy committee (MPC) left its benchmark interest rate unchanged at 12 percent on Monday. The CBN moved the band it wants the local naira currency to trade in to between 150-160 naira against the U.S. dollar, compared with 145-155 naira to the dollar previously, due to prolonged naira weakness.
http://jlne.ws/tiGEQs

Sri Lanka denies devaluation at IMF request
AFP via Yahoo! News
Sri Lanka denied on Wednesday that it had devalued its currency at the demand of the International Monetary Fund to secure the rest of a $2.6 billion bailout.
http://jlne.ws/vv8uMD

Thai Central Bank Set To Cut Interest Rate: Capital Economics
Nasdaq
http://jlne.ws/rT82zk

Philippine Central Bank Reviews Policy On Reserve Requirements
http://jlne.ws/uENaBd

Russia Central Banker: Risk Of Major European Or US Bank Failure Near Zero
Nasdaq
http://jlne.ws/vW9KU1

Bank of Greece: Nation may be driven out of euro
Market Watch
LONDON (MarketWatch) -- The Bank of Greece said on Wednesday that the nation is in "the most critical period" in its post-war history and could potentially be driven out of the euro zone. Greece must focus all efforts on meeting the targets set in an October agreement, the central bank said. Otherwise, the nation may face "an uncontrolled downward trajectory that would undermine many of the ...
http://jlne.ws/tnsm8w

S.Africa September c.bank sentiment indicator dips
Reuters via Yahoo! News
JOHANNESBURG (Reuters) - The South African central bank's monthly economic indicator nudged lower in September, falling by 0.3 percent month-on-month compared with a 2.1 percent drop in August, the South African Reserve Bank said on Tuesday. The indicator, which collates data such as business confidence, job advertisements and the volume of manufacturing orders to gauge the economic outlook, has ...
http://jlne.ws/uY53r0

Turkish Central Banks Holds Key Rate As Expected
Nasdaq
http://jlne.ws/taBHY2



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Top Interest Rate Headlines 11-22-2011: EU bank weight loss scheme threatens famine abroad

EU bank weight loss scheme threatens famine abroad
By Michael Shields, Reuters
Western European banks' efforts to trim balance sheets are putting the squeeze on corporate fundraising from Albania to Australia, threatening the health of economies both near and far.
http://jlne.ws/rRp0LR

Fed officials seek to provide more policy detail Reuters
The Federal Reserve held a wide-ranging debate on communications strategy at its most recent meeting, suggesting a shift in the way it frames policy may be its next step to buttress a weak recovery.
http://jlne.ws/vTaCVo

IMF streamlines lending process CNNMoney
The International Monetary Fund approved a number of changes to streamline its emergency lending process and deal with the European debt crisis.
http://jlne.ws/tjJ35M

Nov. 22, 2011 Release Of Nov. 1-2, 2011 FOMC Meeting MinutesA joint meeting of the Federal Open Market Committee and the Board of Governors of the Federal Reserve System was held in the offices of the Board of Governors in Washington, D.C., on Tuesday, November 1, 2011, at 10:30 a.m. and continued on Wednesday, November 2, 2011, at 8:30 a.m.
http://jlne.ws/sVgfln

Euro-zone economies: LatitudeThe Economist
SINCE bond investors began to discriminate between the euro-zone economies, pushing yields on Spanish, Irish, Greek, Italian and Portuguese government debt soaring, much of the talk in northern Europe has been of profligate governments in the south. As these indicators show, the euro zone's problems go rather deeper than that. A large chunk of the single-currency area has a chronic competitiveness problem, with a horrible mixture of high unemployment, low productivity and low investment. One unsolved mystery is why all this ought to have some correlation with latitude. Answers to the Bundesbank, please.
http://jlne.ws/u2mY19

Santander to sell near $1 billion stake in Chile unit Reuters
Spanish bank Santander SAN.MC> will sell a 7.8 percent stake in Santander Chile STG.SN (SAN.N), worth around $1 billion dollars, to boost core capital, the Chilean affiliate said, sending the local unit's shares plunging.
http://jlne.ws/rGcmPu

IMF beefs up lending tools, launches liquidity line Reuters
The International Monetary Fund on Tuesday beefed up its lending instruments and introduced a new six-month liquidity line, throwing help to countries at risk from the euro zone crisis.
http://jlne.ws/v3Db8u

Norway Better Placed to Weather Deepening Euro Turmoil, IMF Says Bloomberg
Norway is “better placed” than most in Europe to weather an intensification of the euro area’s debt turmoil, the International Monetary Fund said.
http://jlne.ws/v2JNBA

Sarkozy, Merkel, Monti To Meet In Strasbourg ThursdayDow Jones/Nasdaq
The leaders of France, Germany and Italy will meet in StrasbourgNov. 24 to discuss key European meetings, the French presidency said Tuesday, as the euro zone's sovereign debt crisis continues to show signs of deepening.
http://jlne.ws/tPsvf5

Strauss-Kahn sues Sarkozy aide and leading French newspaper Guardian
Former IMF chief Dominique Strauss-Kahn, tipped to become France's next president before his arrest on sex assault charges, is suing a newspaper, several magazines and an adviser of President Nicolas Sarkozy over reports about him, his lawyers have said.
http://jlne.ws/tDqKTs

Eris Exchange Receives FOW Magazine Award for Innovation by an ExchangePress Release
Eris Exchange, a US-based futures exchange, today announced that it has received the 2011 FOW Award for Best Innovation by an Exchange in the Field of Product Design for North America. The award, which was announced at the FOW Derivatives World event in London, recognizes Eris Exchange's 2010 introduction of the groundbreaking Interest Rate Swap Futures contract that embeds the cash flows of OTC interest rate swaps into a futures contract cleared by CME Clearing.
http://jlne.ws/rHg8Dt

CFTC Seeks Comment on Request from ICE Clear Credit for Order Permitting Portfolio Margining of Swaps in Customer Acct Press Release
The Commodity Futures Trading Commission (Commission) is requesting public comment on a petition submitted by ICE Clear Credit LLC (ICC) for an order pursuant to Section 4d(f) of the Commodity Exchange Act (Act). The petition requests an order that would set forth terms and conditions under which ICC and its clearing members that are dually registered as futures commission merchants and securities broker-dealers would be permitted to (1) commingle in an account subject to Section 4d(f) of the Act (a cleared swaps customer account) positions in swaps and security-based swaps and related customer money, securities and property; and (2) portfolio margin the swaps and security-based swaps held in the cleared swaps customer account.
http://jlne.ws/vdcdjC

Super-committee failure triggers blame game BBC
The super-committee's failure to reach agreement on reducing the US deficit means we are now deep into the blame game, positioning for next year's presidential election.
http://jlne.ws/t9OgH9

Obama Pushes Payroll Tax Cut After Debt Panel Fails Reuters/CNBC
President Barack Obama will challenge the U.S. Congress to preserve an expiring payroll tax cut on Tuesday as he travels to New Hampshire to seize the initiative in the wake of a collapsed effort to reduce the nation's budget deficit.
http://jlne.ws/stcdz5

Interview With NY Fed Authors Who Gained A Window Into CDS Trading [Video]http://jlne.ws/tVBPEc

SunGard’s Valdi Facilitates Futures and Options Trading on Tokyo Stock Exchange’s Tdex+ PlatformPress Release
SunGard’s Valdi facilitates futures and options trading on the Tokyo Stock Exchange’s (TSE) Tdex+ platform, which has brought futures and options trading in Japan together on a single, low latent, electronic platform. SunGard’s customers in Japan and overseas are already using Valdi for the unified trading of futures and options, both in enterprise software installations and as Valdi Market Access managed solutions. SunGard has been working closely with its customers help ensure the smooth migration of their futures trading operations onto Tdex+.
http://jlne.ws/sx4JBO

Deutsche Bank is reviewing the structure of its global Asset Management division
Press ReleaseDeutsche Bank (XETRA: DBKGn.DE / NYSE: DB) announced today that it is conducting a strategic review of its global Asset Management division. While the Bank remains committed to asset management, this review is part of the Bank’s continual effort to maintain an optimal business mix and be among the market leaders in each of its businesses.
http://jlne.ws/sgdnrh

Bank of England: A few remarks on current monetary policy in a rebalancing economy - speech by Paul Tucker Speaking in London today, Paul Tucker – Deputy Governor, Financial Stability, Member of the Monetary Policy Committee and Member of the Financial Policy Committee – discusses current monetary policy in light of the need for the economy to rebalance. He says: "Given the ferocity of the shocks that have already hit the economy, and the pervasive uncertainty that persists about global economic and financial conditions, these are circumstances where taking longer than usual to re-achieve the 2% target is warranted, so that the economy’s supply capacity is not impaired by more than can be avoided." But he cautions that "...an absolute precondition for maintaining that support to demand, and so limiting the damage to the economy’s supply capacity, is the credibility of monetary policy."
http://jlne.ws/vkvnxH

Richmond Fed Manufacturing Survey for November (Text)Bloomberg
Manufacturing activity in the central Atlantic region stabilized in November following four months of contraction, according to the Richmond Fed’s latest survey.
http://jlne.ws/suSRCO

FDIC: Number of 'problem banks' fall
MarketWatchThe number of institutions on the Federal Deposit Insurance Corp.'s problem list in the third quarter of 2011 declined for the second quarter in a row and the industry posted its ninth-straight profitable quarter, the agency said Tuesday
http://jlne.ws/syr4tx

SunGard Supports US OTC Interest Rate Swaps On LCH.Clearnet’s SwapClear Chicago, IL – November 22, 2011 – SunGard’s Stream GMI solution for post-trade listed derivatives clearing and accounting now supports LCH.Clearnet Ltd’s (LCH.Clearnet) OTC interest rate swap (IRS) clearing service SwapClear in the U.S. Stream GMI’s support of SwapClear in the U.S, combined with its existing support for SwapClear in Europe, provides clearing members and market participants with processing and accounting support when clearing interest rate swaps.

Pimco's El-Erian Calls U.S. Economy `Terrifying' [Video]http://jlne.ws/sqc5tU

Fed Releases Final Rule on Capital Plans, Stress TestingBanks with more than $50 billion of assets must be "well prepared" to meet new international capital standards when they file capital plans next year, according to a final rule issued by the Federal Reserve Board on Tuesday.
http://jlne.ws/sTqF4g

Nov. 22, 2011 Release Of Nov. 1-2, 2011 FOMC Meeting Minutes

A joint meeting of the Federal Open Market Committee and the Board of Governors of the Federal Reserve System was held in the offices of the Board of Governors in Washington, D.C., on Tuesday, November 1, 2011, at 10:30 a.m. and continued on Wednesday, November 2, 2011, at 8:30 a.m.
PRESENT:
Ben Bernanke, Chairman
William C. Dudley, Vice Chairman
Elizabeth Duke
Charles L. Evans
Richard W. Fisher
Narayana Kocherlakota
Charles I. Plosser
Sarah Bloom Raskin
Daniel K. Tarullo
Janet L. Yellen
Christine Cumming, Jeffrey M. Lacker, Dennis P. Lockhart, Sandra Pianalto, and John C. Williams, 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
William B. English, Secretary and Economist
Deborah J. Danker, Deputy Secretary
Matthew M. Luecke, Assistant Secretary
David W. Skidmore, Assistant Secretary
Michelle A. Smith, Assistant Secretary
Scott G. Alvarez, General Counsel
David W. Wilcox, Economist
James A. Clouse, Thomas A. Connors, Steven B. Kamin, Loretta J. Mester, Simon Potter, David Reifschneider, Harvey Rosenblum, Lawrence Slifman, Daniel G. Sullivan, and Kei-Mu Yi, Associate Economists
Brian Sack, Manager, System Open Market Account
Jennifer J. Johnson, Secretary of the Board, Office of the Secretary, Board of Governors
Patrick M. Parkinson, Director, Division of Banking Supervision and Regulation, Board of Governors
Nellie Liang, Director, Office of Financial Stability Policy and Research, Board of Governors
Robert deV. Frierson, Deputy Secretary, Office of the Secretary, Board of Governors
William Nelson, Deputy Director, Division of Monetary Affairs, Board of Governors
Andrew T. Levin, Special Adviser to the Board, Office of Board Members, Board of Governors
Linda Robertson, Assistant to the Board, Office of Board Members, Board of Governors
Charles S. Struckmeyer, Deputy Staff Director, Office of the Staff Director, Board of Governors
Michael P. Leahy, Senior Associate Director, Division of International Finance, Board of Governors; William Wascher, Senior Associate Director, Division of Research and Statistics, Board of Governors
Ellen E. Meade, Senior Adviser, Division of Monetary Affairs, Board of Governors
Daniel M. Covitz and Michael T. Kiley,¹ Associate Directors, Division of Research and Statistics, Board of Governors
Christopher J. Erceg,¹ Deputy Associate Director, Division of International Finance, Board of Governors; Fabio M. Natalucci, Deputy Associate Director, Division of Monetary Affairs, Board of Governors
Brian J. Gross,¹ Special Assistant to the Board, Office of Board Members, Board of Governors
David Lopez-Salido,¹ Assistant Director, Division of Monetary Affairs, Board of Governors
David H. Small, Project Manager, Division of Monetary Affairs, Board of Governors
Mark A. Carlson, Senior Economist, Division of Monetary Affairs, Board of Governors
Penelope A. Beattie, Assistant to the Secretary, Office of the Secretary, Board of Governors
Sarah G. Green, First Vice President, Federal Reserve Bank of Richmond
Glenn D. Rudebusch, Executive Vice President, Federal Reserve Bank of San Francisco
David Altig, Geoffrey Tootell, and Christopher J. Waller, Senior Vice Presidents, Federal Reserve Banks of Atlanta, Boston, and St. Louis, respectively
Todd E. Clark, Edward S. Knotek II, and Nathaniel Wuerffel, Vice Presidents, Federal Reserve Banks of Cleveland, Kansas City, and New York, respectively
Deborah L. Leonard, Assistant Vice President, Federal Reserve Bank of New York
Robert L. Hetzel, Senior Economist, Federal Reserve Bank of Richmond
By unanimous vote, the Committee selected David W. Wilcox to serve as Economist, and Lawrence Slifman to serve as Associate Economist, effective November 1, 2011, until the selection of their successors at the first regularly scheduled meeting of the Committee in 2012.
Developments in Financial Markets and the Federal Reserve's Balance Sheet
The Manager of the System Open Market Account (SOMA) reported on developments in domestic and foreign markets during the period since the Federal Open Market Committee (FOMC) met on September 20-21, 2011. He also discussed the developments in connection with the bankruptcy filing of MF Global Holdings Ltd. and its finance subsidiary, MF Global Finance USA Inc., and with the termination of MF Global Inc. as a primary dealer. The Manager reported on System open market operations, including the ongoing reinvestment into agency-guaranteed mortgage-backed securities (MBS) of principal payments received on SOMA holdings of agency debt and agency-guaranteed MBS as well as the operations related to the maturity extension program authorized at the September 20-21 FOMC meeting. 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 over the intermeeting period.
Monetary Policy Strategies and Communication
The staff gave a presentation on alternative monetary policy strategies, and meeting participants discussed those alternatives as well as potential approaches for enhancing the clarity of their public communications. No decision was made at this meeting to change the Committee's policy strategy or communications. It was noted that many central banks around the world pursue an explicit inflation objective, maintain flexibility to stabilize economic activity, and seek to communicate their forecasts and policy plans as clearly as possible. Many participants pointed to the merits of specifying an explicit longer-run inflation goal, but it was noted that such a step could be misperceived as placing greater weight on price stability than on maximum employment; consequently, some suggested that a numerical inflation goal would need to be set forth within a context that clearly underscored the Committee's commitment to fostering both parts of its dual mandate. More broadly, a majority of participants agreed that it could be beneficial to formulate and publish a statement that would elucidate the Committee's policy approach, and participants generally expressed interest in providing additional information to the public about the likely future path of the target federal funds rate. The Chairman asked the subcommittee on communications to give consideration to a possible statement of the Committee's longer-run goals and policy strategy, and he also encouraged the subcommittee to explore potential approaches for incorporating information about participants' assessments of appropriate monetary policy into the Summary of Economic Projections.
Committee participants shared their views regarding the potential merits and pitfalls of making conditional commitments regarding the future course of monetary policy. As noted in the staff briefing, economic theory and model simulations suggested that a policy strategy involving such commitments could foster better macroeconomic outcomes than a discretionary approach of reoptimizing policy at every meeting, so long as the public understood the central bank's strategy and believed that policymakers would follow through on those commitments. Some participants noted that conditional commitments might be particularly helpful in providing additional accommodation and mitigating downside risks when the policy rate is close to its effective lower bound, because a central bank can commit to a shallower interest rate trajectory than investors would expect if policymakers followed a purely discretionary approach. However, many pointed out that the implementation of such a strategy could pose substantial communication challenges and that the benefits would be diminished if the strategy was not fully credible. Indeed, one participant suggested that additional purchases of longer-term securities would be a clearer and more effective way to provide additional monetary accommodation when the federal funds rate was near its lower bound.
Given the potential pitfalls of pursuing commitment strategies extending far out into the future, many participants thought that the Committee should consider policies intended to accrue some of the gains from conditional commitments and to perform well in a wide range of alternative scenarios. In this vein, a number of participants expressed support for the possibility of clarifying the conditionality of the Committee's forward guidance about the trajectory of the federal funds rate through setting numerical thresholds for unemployment and inflation that would warrant exceptionally low levels for the policy rate. However, several participants noted that such thresholds could be confusing in the absence of a clear expression of the Committee's longer-term goals. Moreover, others suggested that such an approach could be problematic in light of significant uncertainties about the longer-run normal rate of unemployment. One participant pointed to those uncertainties as instead supporting the use of thresholds as a way of managing potential inflation risks associated with additional accommodation.
The Committee also considered policy strategies that would involve the use of an intermediate target such as nominal gross domestic product (GDP) or the price level. The staff presented model simulations that suggested that nominal GDP targeting could, in principle, be helpful in promoting a stronger economic recovery in a context of longer-run price stability. Other simulations suggested that the single-minded pursuit of a price-level target would not be very effective in fostering maximum sustainable employment; it was noted, however, that price-level targeting where the central bank maintained flexibility to stabilize economic activity over the short term could generate economic outcomes that would be more consistent with the dual mandate. More broadly, a number of participants expressed concern that switching to a new policy framework could heighten uncertainty about future monetary policy, risk unmooring longer-term inflation expectations, or fail to address risks to financial stability. Several participants observed that the efficacy of nominal GDP targeting depended crucially on some strong assumptions, including the premise that the Committee could make a credible commitment to maintaining such a strategy over a long time horizon and that policymakers would continue adhering to that strategy even in the face of a significant increase in inflation. In addition, some participants noted that such an approach would involve substantial operational hurdles, including the difficulty of specifying an appropriate target level. In light of the significant challenges associated with the adoption of such frameworks, participants agreed that it would not be advisable to make such a change under present circumstances.
Staff Review of the Economic Situation
The information reviewed at the November 1-2 meeting indicated that the pace of economic activity strengthened somewhat in the third quarter, reflecting in part a reversal of the temporary factors that weighed on economic growth in the first half of the year. However, labor market conditions continued to be weak. Overall consumer price inflation was more moderate than earlier in the year, as prices of energy and some commodities declined from their recent peaks. Inflation for other goods and services also appeared to have moderated, and measures of longer-run inflation expectations remained stable.
Private nonfarm employment rose modestly in September, boosted in part by the return of communications workers who were on strike in August. Nonetheless, the pace of private-sector job gains in the third quarter as a whole was less than it was in the first half of the year. Meanwhile, employment in the state and local government sector continued to trend lower. The unemployment rate held at 9.1 percent in September, and both long-duration unemployment and the share of workers employed part time for economic reasons were still high. Initial claims for unemployment insurance have edged down since the middle of September but have remained at a level consistent with only modest employment growth, and most indicators of businesses' hiring plans have showed no improvement.
Industrial production rose modestly in September, and the manufacturing capacity utilization rate edged up. Output in the motor vehicle--related sectors continued to step up following the disruptions associated with the earthquake in Japan earlier in the year, but the pace of factory production outside of those sectors was sluggish. Motor vehicle assemblies were scheduled to rise further in the fourth quarter, but broader indicators of near-term manufacturing activity, such as the diffusion indexes of new orders from the national and regional manufacturing surveys, remained at levels consistent with only modest increases in production in the coming months.
Real personal consumption expenditures (PCE) rose briskly in September but posted a more moderate gain for the third quarter as a whole. Motor vehicle purchases increased significantly in September to a level well above that in the spring (when availability of some models was limited by supply chain disruptions), and sales of new light motor vehicles stepped up further in October. However, real disposable income declined in the third quarter, as increases in consumer prices more than offset small gains in nominal income. Moreover, consumer sentiment continued to be downbeat in October.
Housing market activity remained very weak, held down by the large overhang of foreclosed and distressed properties along with limited demand in an environment of uncertainty about future home prices and tight underwriting standards for mortgage loans. Although starts and permits for new single-family homes edged up in September, they stayed near the depressed levels seen since the middle of last year. Sales of new and existing homes continued to be soft in recent months, and home prices trended lower.
Real business purchases of equipment and software expanded appreciably in the third quarter. Moreover, new orders for nondefense capital goods continued to run ahead of shipments in August and September; the buildup of unfilled orders pointed toward further increases in spending for business equipment in subsequent months. Nevertheless, survey measures of business conditions and sentiment in October suggested that firms remained cautious. Real business expenditures for nonresidential construction also rose appreciably in the third quarter, but spending was still at a relatively low level and continued to be held back by elevated vacancy rates and tight credit conditions for construction loans. In the third quarter, businesses increased their inventories at a much slower pace than in the second quarter, and inventory-to-sales ratios in most industries appeared to be in a comfortable range.
Real federal purchases increased in the third quarter, as defense expenditures continued to rise from unusually low levels early in the year, more than offsetting a decrease in nondefense spending. At the state and local level, real purchases declined in the third quarter at a noticeably slower rate than in the first half of the year as the pace of reductions in payrolls eased and construction spending rose slightly.
The U.S. international trade deficit was virtually the same in August as it was in July, as both exports and imports moved down only by small amounts. The decrease in exports reflected lower sales of automotive products and capital goods, which more than offset increases in exports of industrial supplies and consumer goods. The dip in imports was the result of lower purchases of capital goods, automotive products, and consumer goods, which outweighed an increase in petroleum imports. The advance release of the third-quarter data for the national income and product accounts showed real exports of goods and services expanding faster than real imports. As a result, net exports were estimated to have made a small positive contribution to real GDP growth in the third quarter, a contribution of about the same size as in the second quarter.
Overall U.S. consumer price inflation, as measured by the PCE price index, was more moderate in the third quarter than in the first half of the year. Consumer prices for food and energy increased last quarter at a slower pace than earlier in the year, and consumer prices excluding food and energy rose a bit less than in the preceding quarter. Near-term inflation expectations from the Thomson Reuters/University of Michigan Surveys of Consumers in October continued to be well below the elevated level seen in the spring, and longer-term inflation expectations in the survey remained stable.
Measures of labor compensation showed that wage increases continued to be subdued. The employment cost index increased at a modest rate over the year ending in the third quarter, and compensation per hour in the nonfarm business sector appeared to have decalerated somewhat last quarter. Similarly, the 12-month change in average hourly earnings for all employees remained subdued in September.
Foreign economic activity appeared to have largely recovered from the effects of the Japanese disaster in March, as production in Japan rebounded and supply disruptions waned. However, recent data pointed to considerable weakness in the euro-area economy. Elsewhere, indicators were somewhat more upbeat, with employment in Canada continuing to rise through September, while GDP growth in China over the year ending in the third quarter was a little less than in the first half of the year but still quite robust. Foreign inflation remained contained, although the reversal of earlier increases in energy prices appeared to be passing through to consumer price inflation relatively slowly in some countries.
Staff Review of the Financial Situation
Financial markets were quite volatile over the period since the September FOMC meeting. Investor sentiment was strongly influenced by prospects for Europe, as market participants remained highly attuned to developments regarding possible steps to contain the fiscal and banking problems there. Economic data releases that were, on balance, somewhat better than market participants expected provided some support to financial markets.
Longer-term Treasury yields declined appreciably following the release of the September FOMC statement. Investors reportedly viewed the Committee's assessment of the economic outlook as more downbeat than anticipated. In addition, the announcement that the Federal Reserve would lengthen the average maturity of its portfolio by purchasing longer-term Treasury securities and selling an equivalent amount of shorter-term Treasury securities reportedly contributed to the decline in longer-term yields on the day. Yields on current-coupon agency MBS also moved lower on the announcement that the Federal Reserve would begin to reinvest principal payments on agency securities in agency MBS. Over the following weeks, movements in yields were driven by shifts in investors' assessments of the ongoing efforts to address the European fiscal and banking situation and by somewhat stronger-than-expected U.S. economic data. On balance since the September FOMC meeting, Treasury yields on shorter-dated securities and the expected path of the federal funds rate implied by money market futures quotes were not much changed. Yields on Treasury securities with maturities beyond 10 years moved down. Measures of near-term inflation compensation derived from nominal and inflation-protected Treasury securities rose slightly over the intermeeting period, while similar measures of longer-term inflation compensation were about unchanged.
Credit default swap (CDS) spreads and equity prices of large U.S. banking organizations were again volatile over the period. Investor sentiment toward these financial institutions was strongly influenced by changes in investors' assessments of the risks associated with the European fiscal and banking problems and the exposure of various financial institutions to Europe. Third-quarter U.S. bank earnings reports generally met investors' expectations. On net, equity prices for U.S. banking firms were not much changed over the period since the last FOMC meeting, while their CDS spreads were a bit higher. European bank CDS spreads remained elevated, and these institutions continued to face somewhat strained conditions in short-term bank funding markets.
Although equity markets were volatile, broad U.S. equity price indexes ended the intermeeting period little changed. Earnings reports for nonfinancial firms generally came in somewhat better than investors expected and about in line with second-quarter levels. Gross public equity issuance by nonfinancial firms continued to be very weak in September and October, with a large number of firms shelving planned initial public offerings amid the volatility in equity markets.
Yields on investment- and speculative-grade corporate bonds edged lower, on net, over the period, leaving their spreads to Treasury securities slightly narrower. Credit flows for nonfinancial firms were mixed in September and October. The pace of bond financing by investment-grade nonfinancial corporations slowed some in October from its robust September pace, while bond issuance by speculative-grade firms was limited. Nonfinancial commercial paper outstanding posted solid growth in October. In the leveraged loan market, issuance financed by institutional investors slowed significantly in the third quarter.
Financing conditions for commercial real estate (CRE) markets appeared to have deteriorated in some respects. Issuance of commercial mortgage-backed securities (CMBS) slowed further in the third quarter amid widening CMBS spreads, and only a small number of deals were in the pipeline for the rest of the year. Prices of most types of commercial properties remained depressed, and aggregate vacancy and delinquency rates for commercial properties were close to their recent highs.
Interest rates on residential mortgages changed little, on net, over the intermeeting period but remained at historically low levels. The recent low rates appeared to have only a modest effect on the pace of mortgage refinancing, as tight underwriting standards and low home equity continued to limit the access of many households to the mortgage market. However, in October, the Federal Housing Finance Agency announced changes to the Home Affordable Refinance Program to expand eligibility and take-up among borrowers with mortgages backed by Fannie Mae and Freddie Mac. Indicators of home prices remained weak, reflecting a large inventory of unsold properties and modest demand for homes. The pace at which performing prime mortgages became newly delinquent rose over the summer but remained below last year's levels.


Consumer credit decreased in August. Growth in nonrevolving credit, which had been volatile due to a shift in the timing of student loan originations, stepped down from the pace seen earlier in the year but remained solid in recent months. Issuance of consumer credit asset-backed securities continued at a moderate pace through mid-October. Delinquency rates for several categories of consumer loans remained low, a reflection in part of tighter underwriting standards that shifted the composition of borrowers toward those with stronger credit histories.
Core commercial bank loans expanded slightly in the third quarter. Commercial and industrial (C&I) loans accelerated following the already strong increases seen over the first half of the year. That growth was concentrated among large domestic banks and non-European foreign institutions. Consumer loans on banks' books advanced modestly in the third quarter, ending a two-year string of quarterly declines. Closed-end residential mortgage loans held by banks also increased amid the modest pickup in refinancing activity, while CRE loans contracted. The October Senior Loan Officer Opinion Survey on Bank Lending Practices showed less net easing of lending standards by domestic banks than in the past few surveys. In particular, domestic banks reported little change in their standards on C&I loans over the third quarter, on net, compared with more widespread reports of easing in the previous several quarters. Demand for loans reportedly was little changed, on balance, over the third quarter.
M2 grew at a modest pace in September and October, well below the rapid rate seen in July and August. Some of the factors that contributed to M2 growth over the summer, such as concerns about European financial developments and equity market volatility, persisted and supported elevated levels of M2 deposits but did not trigger additional sizable inflows. The monetary base also grew moderately as its major components--reserve balances and currency--increased over the period.
Foreign financial markets remained volatile over the intermeeting period, and funding pressures for many European financial institutions continued. After falling sharply in August and early September, foreign equity prices rose, with stocks in the euro area outperforming those in most other economies. For most of the period, market participants seemed heartened by European leaders' efforts to address the fiscal and financial challenges present in the euro area, although the news late in the period on a possible Greek referendum sent stock prices down sharply. Benchmark sovereign yields increased over the period, but spreads of yields on 10-year sovereign bonds of the most vulnerable euro-area countries over yields on German bunds were little changed on net. Some reversal of safe-haven flows in October reportedly led the dollar to give back most of the gains it registered in late September, leaving the broad nominal foreign exchange value of the dollar little changed, on balance, relative to its level at the time of the September FOMC meeting. At the end of October, Japanese officials intervened in foreign exchange markets through sales of yen.
The first round of the three-month U.S. dollar auctions that major foreign central banks announced on September 15 was held in October; demand was quite limited, and only the European Central Bank (ECB) drew on its swap line with the Federal Reserve. Korea and Japan announced that they would increase the size and scope of their bilateral currency swap arrangements, expanding the size of their existing won--yen swap arrangement and establishing a $30 billion facility in which dollars could be swapped for either won or yen.
A number of central banks announced additional measures to stimulate economic activity. The Bank of England and Bank of Japan each announced expansions of their respective asset purchase programs, and the ECB announced that it would conduct two refinancing operations with maturities of slightly more than a year and launched a new covered bond purchase program. The central banks of Brazil, Indonesia, and Israel lowered their policy rates, citing a potential slowdown in global growth.
Staff Economic Outlook
With the recent data on spending, particularly for consumer expenditures and business outlays for capital goods and nonresidential construction, stronger than the staff anticipated at the time of the September FOMC meeting, the staff's near-term projection for the rate of increase in real GDP was revised up. However, other important near-term indicators of economic activity remained downbeat: Measures of consumer sentiment were still very low, business surveys pointed to continued caution by firms, conditions in the labor market remained weak, and gains in manufacturing production outside of the motor vehicle--related sectors were sluggish. Moreover, many of the factors that have been restraining the recovery, such as the large overhang of vacant houses, tight credit conditions, and elevated risk premiums, remained in place. Consequently, the staff's outlook for economic activity over the medium term was similar to the projection prepared for the September FOMC meeting. The staff continued to project that real GDP would accelerate gradually in 2012 and 2013, supported by accommodative monetary policy, further improvements in credit conditions, and a pickup in consumer and business sentiment from their current low levels. Over the forecast period, the increase in real GDP was projected to be sufficient to reduce the slack in product and labor markets only slowly, and the unemployment rate was expected to remain elevated at the end of 2013.
The staff's forecast for inflation was essentially unchanged from the projection prepared for the September FOMC meeting. The upward pressure on consumer prices from the rise in commodity and import prices early in the year was anticipated to ease further in the current quarter. With longer-run inflation expectations stable and significant slack anticipated to persist in labor and product markets, the staff continued to expect prices to rise at a subdued pace in 2012 and 2013.
Participants' Views on Current Conditions and the Economic Outlook
In conjunction with this FOMC meeting, all participants--the five members of the Board of Governors and the presidents of the 12 Federal Reserve Banks--provided projections of output growth, the unemployment rate, and inflation for each year from 2011 through 2014 and over the longer run. Longer-run projections represent 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. Although participants had revised downward their projections for growth since their previous forecasts in June, they continued to anticipate that economic growth would pick up and the unemployment rate would decline gradually through 2014. They also continued to project that inflation would settle at or below levels consistent with the Committee's dual mandate. Participants' forecasts are described in more detail in the Summary of Economic Projections, which is attached as an addendum to these minutes.
In their discussion of the economic situation and outlook, meeting participants regarded the information received during the intermeeting period as indicating that economic growth had strengthened somewhat in the third quarter, reflecting in part a reversal of temporary factors that had weighed on the economic recovery in the first half of the year. Participants noted that global supply chain disruptions associated with the natural disaster in Japan had diminished, and that the prices of energy and some commodities had come down from their recent peaks, easing strains on household budgets and likely contributing to a somewhat stronger pace of consumer spending in recent months. More broadly, final demand from consumers and businesses was stronger than had been expected at the time of the September FOMC meeting. Nonetheless, most participants anticipated that the pace of economic growth would remain moderate over coming quarters. While they believed that the economic recovery would continue to be supported by accommodative monetary policy, ongoing improvements in households' and businesses' financial positions, and pent-up demand for goods and services, a number of factors were seen as likely to continue to restrain the pace of economic growth. Those included persistent weakness in the labor and housing markets, still-tight credit conditions for many households and small businesses, low consumer and business confidence, fiscal consolidation at all levels of government, and elevated volatility in financial markets. Moreover, the recovery was still subject to significant downside risks, including strains in global financial markets. With longer-term inflation expectations remaining stable, the effects of earlier increases in the prices of energy and other commodities continuing to wane, and low levels of resource utilization restraining increases in prices and wages, most participants anticipated that inflation would settle, over coming quarters, at or below levels they judged to be most consistent with their dual mandate.
In the household sector, incoming data on retail sales were somewhat stronger than expected, and participants reported scattered optimism among their contacts regarding the prospects for holiday spending. Some participants thought that the effects of balance sheet deleveraging might be running their course or that such effects could be less powerful than had been thought. Others noted that the recent pickup in consumer spending outpaced growth in after-tax incomes and was accompanied by a decline in the saving rate, raising doubts about its sustainability unless income growth picked up. In addition, households appeared to remain pessimistic about the prospects for their future income, the job market was still weak, consumer confidence was historically very low, and credit conditions for many households were still tight. The housing sector continued to be depressed, and some meeting participants indicated that the elevated supply of available homes and the overhang of foreclosures, together with limited access to mortgage credit, were continuing to put downward pressure on house prices and housing construction. A few participants noted that recent government initiatives aimed at helping high-loan-to-value borrowers refinance could be useful steps toward stabilizing the housing market.
Business contacts in many parts of the country were reported to be cautious and uncertain about the economic and political outlook and so remained reluctant to hire or expand capacity. However, production in the manufacturing, agriculture, and energy sectors continued to increase, and the auto sector was rebounding from earlier supply chain disruptions. In addition, businesses in a number of regions reported ongoing capital investment to increase productivity. Input cost pressures were said to have abated somewhat, while labor costs remained subdued. Overall, credit costs were low, and profits and balance sheets at nonfinancial corporations were healthy, with many firms continuing to hold very high levels of cash.
Despite some signs of improvement of late, the available indicators pointed to continued weakness in overall labor market conditions, and the unemployment rate remained elevated. Some participants suggested that the persistently high level of unemployment reflected the impact of structural factors, including mismatches between the skills of the unemployed and the skills demanded in sectors in which jobs were currently available. Consistent with this view, some business contacts reportedly were concerned about the low quality of many job applicants, while other contacts noted that workers with some specialized skills continued to be in short supply. However, other participants indicated that such concerns were not new and that much of the current elevated level of unemployment reflected cyclical factors, with one pointing to the lack of wage pressures as evidence. As a result, they expected that unemployment would fall back as the economy recovered. Some participants again warned that the exceptionally high level of long-term unemployment could ultimately lead to permanent negative effects on the skills and employment prospects of the unemployed.
Meeting participants observed that financial markets continued to be particularly volatile during the intermeeting period as investors responded to incoming economic data and to news regarding fiscal and financial developments in Europe. Liquidity in many markets worsened, in part because financial institutions more reliant on short-term funding markets reportedly pulled back from risk-taking and became somewhat less willing to make markets. Participants noted the announcement by European policymakers of a new package of measures to address Greece's fiscal situation as well as the vulnerabilities of European banks and sovereigns. However, participants indicated that many details of the new plan had not yet been worked out and that a number of important issues remained unresolved. Participants took note of the possible adverse effects on U.S. financial markets and the broader U.S. economy if European sovereign debt and banking problems intensified. Participants observed, however, that the capital and liquidity positions of U.S. banks had strengthened in recent quarters and that the credit quality of loans to businesses and households had improved further. Contacts in the banking sector reported that U.S. banks continued to be willing to extend loans to creditworthy borrowers, but loan demand remained weak and competition for such borrowers was putting pressure on net interest margins. It was noted that very low interest rates were negatively affecting pension funds and the profitability of the life insurance industry. Participants also discussed the events surrounding the bankruptcy filing of MF Global Holdings Ltd. and saw the financial stability implications of this development as limited to date.
Participants generally agreed that measures of total inflation appeared to have moderated since earlier in the year as prices of energy and some commodities declined from their peaks. Measures of core inflation also seemed to have declined in recent months, and longer-term inflation expectations remained well anchored. Nonetheless, some participants noted that core inflation had not come down as quickly or by as much as they had expected in light of the reduction in commodity prices, perhaps suggesting that the level of potential output was lower than had been thought. However, other participants pointed to the subdued pace of gains in labor costs as a factor damping inflation, and reports from contacts suggested that upward pressure on wages remained limited.
Regarding their overall outlook for economic activity, participants generally agreed that, even with the positive news received over the intermeeting period, the most probable outcome was a moderate pace of economic growth over the medium run with only a gradual decline in the unemployment rate. While some factors were seen as likely to support growth going forward--such as pent-up demand, improvements in household and business balance sheets, and accommodative monetary policy--participants observed that the pace of economic recovery would likely continue to be held down for some time by persistent headwinds. In particular, they pointed to very low levels of consumer and business confidence, further efforts by households to deleverage, cutbacks at all levels of government, elevated financial market volatility, still-tight credit conditions for some households and small businesses, and the ongoing weakness in the labor and housing markets. While recent incoming data suggested reduced odds that the economy would slide back into recession, participants still saw significant downside risks to the outlook for economic growth. Risks included potential spillovers to U.S. financial markets and institutions, and so to the broader U.S. economy, if the European debt and banking crisis were to worsen significantly. In addition, participants noted the risk of a larger-than-expected fiscal tightening and the possibility that structural problems in the housing market had attenuated the transmission of monetary policy actions to the real economy. It was also noted that the extended period of highly accommodative monetary policy could eventually lead to a buildup of financial imbalances. A few participants, however, mentioned the possibility that economic growth could be more rapid than currently expected, particularly if gains in output and employment led to a virtuous cycle of improvements in household balance sheets, increased confidence, and easier credit conditions.
With respect to the outlook for inflation, participants generally anticipated that inflation would recede further over coming quarters and would settle over the medium run at levels at or below those judged to be most consistent with the Committee's dual mandate. They pointed to the further dissipation of the effects of earlier increases in the prices of energy and some commodities, the significant slack in resource utilization, the continued subdued growth in labor compensation, and well-anchored inflation expectations as factors likely to contribute to the moderation in inflation over time. A number of participants saw the risks to the outlook for inflation as roughly balanced. A few participants felt that the continuation of the current stance of monetary policy, coupled with the possibility of a rebound in energy and commodity prices, posed some upside risks to inflation. Other participants instead saw inflation risks as tilted to the downside, in light of their expectations for persistent resource slack. It was noted that U.S. inflation had been influenced relatively more by commodity price fluctuations in recent years; because commodity prices reflect global economic conditions, U.S. inflation might be less affected by domestic factors and more linked to the global outlook than in the past.
Committee Policy Action
Members noted that information received over the intermeeting period pointed to somewhat stronger economic growth in the third quarter, partly reflecting a reversal of temporary factors that had depressed economic growth in the first half of the year. However, overall labor market conditions remained weak. Members generally anticipated that unemployment would decline only gradually from levels significantly above those that the Committee would expect to prevail in the longer run, with inflation likely to settle at levels at or below those consistent with the Committee's dual mandate. Accordingly, in the discussion of monetary policy for the period ahead, all Committee members agreed to continue the program of extending the average maturity of the Federal Reserve's holdings of securities as announced in September. The Committee decided to maintain its existing policy of reinvesting principal payments from its holdings of agency debt and agency MBS in agency MBS and of rolling over maturing Treasury securities at auction. In addition, the Committee agreed to keep the target range for the federal funds rate at 0 to 1/4 percent and to reiterate its expectation that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013. A few members expressed interest in using language specifying a period of time during which the federal funds rate was expected to remain exceptionally low, rather than a calendar date, arguing that such language might be better to indicate a constant stance of monetary policy over time. However, members generally preferred to retain the existing forward guidance, at least for now. A few members indicated that they believed the economic outlook might warrant additional policy accommodation. However, it was noted that any such accommodation would likely be more effective if it were provided in the context of a future communications initiative, and most of these members agreed that they could support retention of the current policy stance at this meeting. One member dissented from the policy decision on the grounds that additional monetary policy accommodation was warranted at this time. With the Committee in the process of reviewing its monetary policy strategies and communication, and no additional accommodation being provided at this meeting, a few members indicated that they could support the Committee's decision even though they had not favored recent policy actions. The Committee reiterated that it will regularly review the size and composition of its securities holdings and that it is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in the context of price stability. With respect to the statement to be released following the meeting, members agreed that only relatively small changes were needed to reflect the modest improvement in the economic outlook and to note that the Committee would continue to implement its policy steps from recent meetings.
At the conclusion of the discussion, the Committee voted to authorize and direct the Federal Reserve Bank of New York, until it was instructed otherwise, to execute transactions in the System Account in accordance with the following domestic policy directive:

"The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to 1/4 percent. The Committee directs the Desk to continue the maturity extension program it began in September to purchase, by the end of June 2012, Treasury securities with remaining maturities of approximately 6 years to 30 years with a total face value of $400 billion, and to sell Treasury securities with remaining maturities of 3 years or less with a total face value of $400 billion. The Committee also directs the Desk to maintain its existing policies of rolling over maturing Treasury securities into new issues and of reinvesting principal payments on all agency debt and agency mortgage-backed securities in the System Open Market Account in agency mortgage-backed securities in order to maintain the total face value of domestic securities at approximately $2.6 trillion. The Committee directs the Desk to engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions. The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System's balance sheet that could affect the attainment over time of the Committee's objectives of maximum employment and price stability."

The vote encompassed approval of the statement below to be released at 12:30 p.m.:

"Information received since the Federal Open Market Committee met in September indicates that economic growth strengthened somewhat in the third quarter, reflecting in part a reversal of the temporary factors that had weighed on growth earlier in the year. Nonetheless, recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated. Household spending has increased at a somewhat faster pace in recent months. Business investment in equipment and software has continued to expand, but investment in nonresidential structures is still weak, and the housing sector remains depressed. Inflation appears to have moderated since earlier in the year as prices of energy and some commodities have declined from their peaks. Longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect a moderate pace of economic growth over coming quarters and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee's dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.
To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.
The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.
The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools to promote a stronger economic recovery in a context of price stability."

Voting for this action: Ben Bernanke, William C. Dudley, Elizabeth Duke, Richard W. Fisher, Narayana Kocherlakota, Charles I. Plosser, Sarah Bloom Raskin, Daniel K. Tarullo, and Janet L. Yellen.
Voting against this action: Charles L. Evans.
Mr. Evans dissented because he saw the high unemployment rate and the outlook for only weak economic growth as calling for additional policy accommodation at this meeting. Moreover, the longer the current situation of low resource utilization lasted, the more the economy's longer-term growth potential could be impaired. Furthermore, given current policy, his outlook was for inflation to come in below levels consistent with the Committee's dual mandate, bolstering the case for additional monetary easing at this time. He also believed policies with more-explicit forward guidance about the economic conditions under which exceptionally low levels of the funds rate could be maintained would improve the prospects for growth and employment and, while possibly admitting somewhat higher inflation for a time, would still safeguard price stability.
It was agreed that the next meeting of the Committee would be held on Tuesday, December 13, 2011. The meeting adjourned at 10:30 a.m. on November 2, 2011.
Notation Vote
By notation vote completed on October 11, 2011, the Committee unanimously approved the minutes of the FOMC meeting held on September 20-21, 2011.