8/19/97

APPENDIX 1

Charts used by Mr. Fisher in his statement.

Page 1

G-3 FRA and Euro-Deposit Rates
Percent

(August 1, 1996 -August 15,1997)

7
9/24/96

7

6

6

5

....~.~..~.......
~

5

1 Repo Rate
~

DBB lowers

to 3.00% 88/22/96

4
German9x12
~

.. ..
”.

4

3

3
German 3 mo. Euro-DM DeGsit

2

~~..........~~~......~~

~

,

Japan’s Fiscal Year-End

, June , Tankan ’m m 7

June IP

2

7130/97

3131197

1

1

0
9/1/96 11/1/96
1I1 197

0
3/1/97 5/1/97 7/1/97
Kristen M. Batlistelli Markets Group: FRBNY

Page 2
5/1/97=100 Inverted Axis

80
90

Asian Currencies Indexed Against U.S. Dollar (Mav 1.1997 - Aua 15.19971

80

90
100

100

110
Indonesian

110
Rupiah

\
, ,

120

120

130

1,
8

,

'

1

1

, ' ' '

I , , , / , , , l , , , , , , ~ , , , , / , , ,I , , , , , I , , , , / I I . l , , , , I l ,

130

Inverted Axis

90
100

(May 1,1997 - Aug 15, 1997)

90
100

110

110

120

120

130

130

140
0

J

'

I

' '

I

I

, , , ,

, l , , I # m I

l

,

I

,

,

,

1

,

l

L

8

,

I

,

,

A

, ,

8

,

1

" !

140

lay-97 13-May-97 23-May-97 04-Jun-97 16-Jun-97 26-Jun-97

08-Jul-97

18-Jul-97

30-Jul-97 11-Aug-97
Matthew D. J u q e a Kristen M. Battistelli Markets GWP: FRBNY

Page 3
Marks per U.S. Dollar

Dollar-Mark and Dollar-Yen
(May 1,1997-Aug 15,1997)

Yen per U.S. Dollar
I

1.90 1.85 1.80
~

120

1.75 1.70 1.65

. .-

108 106 104 102 100 98

108

f
Index: 91/97 -100

J

, , , , ,

'

,

,

,

"

16 9

ay-97

15May-97

May-97

Wun-97

16Juc-97

%un-97

WuI-97

1sJul-97

3oJul-97

114q-97

(In Local Currency Terms, May 1,1997 - Aug 15,1997)

Equity Indices

135 130 125 120

. . . . . . . .

115 110

~ ~ ~ . . . . . ~ 105 . . . . . . . . . . . . . . .

100
16Jun-97 2Wun-97 Wul-97 18Jul-97 30JuC97 11-Aq-97

95 I

01-May-97

15May-97 25May-97

Wun-97

Matthew D. Junge 8 Srinlvasan lyer Markets G r o w FRBNY

---

OLD PARADIGM

---

---

NEW PARADIGM

---

Growth needs to be moderate, or slowed, to avoid a pick up in inflation.

As a result of investment, productivity, competition, etc., growth can be strong, and even accelerate, without causing inflation to rise.

Pessimist
Current view of economy :
INFLATION is about to break out! It's hiding in the lags. Behind the curve; providing too much liquidity. Sells stocks short; sells bonds short at low yields.

Optimist
Inflation is probably coming; but how soon is hard to tell. Doing a good job; maybe they can pull this off for a few more quarters. Buys stocks and bonds on dips; sells them on rallies.

Optimist
I t ' s a new era: productivity growth is taming inflation.

Pessimist
DEFLATION is here ! There's no pricing power. Global capacity glut looms ahead. Way too tight; only making the deflation worse.

View of Fed:

Doing a great
j o b ! Greenspan

i s a genius!

Maybe they can pull this off forever. Buys loads of scocks and some bonds whenever possible.

Response to low inflation and strong activity:
(e.g., 8/13 PPI and

Sells stocks short; buys Treasuries.

Retail Sales)

Percent

Federal Funds Rate And Operating Balances
8

Page 5

I

8.26

1996
July 5 -August 16
Effective
Range

7

-L--

One Standard Deviation (Plus and Minus)

-6

5~~

- ~~7~~~ I.' ~ . . ~ ..Jt-+--1 --I..~&..+-..........-I.-...A. ~ .~. ~ . ~.-t-~
.
~

........ . ..........,

I

I

-2
$ 's.tillim

A

3 1R

30
20
10

0 07/05 07/09 07/11 07/15 07/17 07/19 07/23 07/25 07/29 07/31 08/02 08/06 08/08 08/12 08/14 08/16
Percent

8

7

6

5

4

I

Operating Balances

5 's.billions

30

07/03 07/08 07/10 07/14 07/16 07/18 07/22 07/24 07/28 07/30 08/01 08/05 08/07 08/11 08/13 08/15