STRICTLY CONFIDENTIAL (FR) CLASS II-FOMC

Financial Indicators

December 18,1990

C W1

One-Year Real Interest Rates

-

1-year T-Bill Minus 1-year Inflation Expectations (Hoey)

Percent

-

10

P- + 0

-

I
I

- 5

I

I

I

I

I

I

I

I

I

I

I

I - 10
Pwceni

1-year T-Bill Minus 1-Year Inflation Expectations (Michigan)

10

5

0' 5

10

-

-

24

- 18

ch.112

The Exchange Value of the Dollar
Nominal
G-1 0 Index
P

Index Level. March 1973-100

P

T

1

*O0

1971

Monthly 0-10 Index

Reml
Index Level (Della1
80

40

I20

loo

Bo

I
1977 1978

I
1979

I
1980

I
1981

I
1982

I
1983

I
1984

I
1985

I
10BB

I
1887

I
1 -

I
le80

I

1
w

80

cllai3

The Yield Curve

Spread Between30year T-Bond Yield and Federal Funds Rate'
T
Quarterly Data

Percentage Polnrs T

T

P

T

PT P

-

92

I/
. , '
I

I t
' ,

8.8

--- __--

November I 3, i990 _______________--------
. . . . . . . . . . . . . . ..........
8.4

December 14,1990

8

7.6

72

6.8

-4

INFLATION EXPECTATIONS (Hoey Survey)
Survey Date Next
1 2 months

First
5 years

Second 5 years

10-year average

-------_-----_________ annual rate,percent---------------------1 9 8 9 : Q2 Q3 Q4 1990: Q1 Q2 Q3 1 9 8 8 : November 5.5 4.9 4.3

ND
4.1 5.0 4.8 5.0 5.3 5.7 5.4 4.9 4.3 4.3 4.1 4.2 5.9 4.8

December
1 9 8 9 : February

4.8 4.5 4.2 ND 4.3 4.4 4.6 4.6
4.1

4.1 4.6 4.5

4.7 4.5 4.3

ND
4.3 4.4 4.1 4.6 4.7 4.6 4.8 4.6 4.5 4.5 4.3 4.4 4.4 4.4

ND
4.3 4.4 4.7 4.6 4.7 4.1 4.8 4.5 4.3 4.4 4.3 4.3 4.5 4.4

April June August November December 1 9 9 0 : May July September November

4.8 4.8 4.5 4.1 4.2 4.3 4.1 4.6 4.4

LONG-TERM REAL INTEREST RATE

1*ear Treasury bond yield less 1O-year average inflationexpedation ( H o e y suwey).

-8

- 7

- 6

- 5

P+
3

- 2
- 1

I
1978

I

I
1980

I

I
1982

I

I
1984

1

I
1986

I

IlllIllHllllllllllllllllllllllllllll 0
1988 1990

-6

Nominal and Real Corporate Bond Rates
Monthly
Pement 18

r
-

16

Nominal Rate
14

12

10

8

8

4

I
1979

I

I
1981

I

I
1983

I

I
1985

I

I
1987

I

I
1989

I

2

1. Yield on Moody’s A-rated cocporate bonds. all industries. 2. Nominal rate less Hoey survey of ten-year inflationexpedations. + Denotes most recent weekly value.

Chmi 6

Stock Indices
Nminal
Monthly
25 index Level, 1941-43-10
c

Standard and Pooh 5M) Stock Index

20

15

ry

r,

10
,-r

---PIE Ra(l0

'+.

1 L
1976 1978 1
0

19

Real

standard and Poor's Stock Index

I

1077

I

I

1979

I

I

1981

I

I 1983 I

I 1986 I

I
1987

I
'

I
1880

I

aNi7

Experimental Price Index for 21 Commodities (Weekly)

-

ALL COMMODITIES
Index. 198601-100

10 8 10
6 140

-

120
10
0
80

60

ALL COMMODITIES EX. CRUDE OIL

t

r

Index. 1986~1~100

1180
160

i
60

- 80

-
-
-

ALL COMMODITIES EX. FOOD AND CRUDE OIL

index. i m ai-iw s

- 180
- 180
- 140
- 120

-

10 0

- 80
60

chst8

Growth of Real M2 and M3
M2
PerCent T P T
T

P T

1'4

I

1959

1 1196511968 11 1 1 1 1962

I I
17 91 1974

1 11980
1
1977

1989

1992-

M3

pepann
P T

I
1959

P

..

T

\I
1 1 1 1
17 97

t

14 12
1
0
8

6

4

1

lgeo

Cha(0

Inflation Indicator Based on M2

---- ----

-

Ratio scale
Current price level (P) Lmg-run equilibrium price level given w m M2 (P)

f
.'
*_-_.-

L L L l111 111

111 u 111

i l
111
111
1988 1974

111 u 111
1980
1986

1 Change in GNP implicitdefiator over the previous four quarters. O Note: Vertical lines mark crossingof P and P . For 1990x24 t 199204 P' is based on the s a f M2 forecast and Pis o tf simulated udng the pdce gap model developed by Hallman, Porter and Small.