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www.bostonfed.org
Implications of Fiscal Austerity
for U.S. Monetary Policy
Eric S. Rosengren
President & CEO
Federal Reserve Bank of Boston
GIC Central Banking Conference
Milan, Italy
May 16, 2013
EMBARGOED UNTIL THURSDAY, MAY 16, 2013 AT 7:45 A.M. U.S. EASTERN TIME AND THURSDAY, MAY 16, 2013 AT 1:45 P.M. MILAN, ITALY TIME; OR UPON DELIVERY
Figure 1
Growth in Real Final Sales
to Private Domestic Purchasers
2007:Q1 - 2013:Q1
Percent Change at Annual Rate
6
1
4
1
2
0
1
-2
0
-4
-6
0
-8
-10
0
2007:Q1
2008:Q1
2009:Q1
Recession
Source: BEA, NBER / Haver Analytics
2010:Q1
2011:Q1
2012:Q1
2013:Q1
Figure 2
Growth in Real Final Sales to
All Domestic and Private Domestic Purchasers
2007:Q1 - 2013:Q1
Percent Change at Annual Rate
6
1
4
1
2
0
1
-2
0
-4
-6
Recession
To Private Domestic Purchasers
To All Domestic Purchasers
-8
-10
0
0
2007:Q1
2008:Q1
2009:Q1
Recession
Source: BEA, NBER / Haver Analytics
2010:Q1
2011:Q1
2012:Q1
2013:Q1
Figure 3
Growth in Real Government Spending
2007:Q1 - 2013:Q1
Percent Change at Annual Rate
12
12.0
10.0
8
8.0
6.0
4
4.0
2.0
0
0.0
-2.0
-4
-4.0
-6.0
-8
-8.0
2007:Q1
2008:Q1
2009:Q1
Recession
Source: BEA, NBER / Haver Analytics
2010:Q1
2011:Q1
2012:Q1
2013:Q1
Figure 4
Contribution of Real Government Spending
to Real GDP Growth
2007:Q1 - 2013:Q1
Percent Change at Annual Rate
2.0
2.00
1.0
1.00
0.0
0.00
-1.0
-1.00
-2.0
-2.00
2007:Q1
2008:Q1
2009:Q1
Recession
Source: BEA, NBER / Haver Analytics
2010:Q1
2011:Q1
2012:Q1
2013:Q1
Figure 5
Growth in Real Government Spending by
Federal and State and Local Governments
2007:Q1 - 2013:Q1
Percent Change at Annual Rate
15
15.0
Series4
Federal
10
Series2
State and Local
10.0
5
5.0
0
0.0
-5
-5.0
-10
-10.0
-15
-15.0
2007:Q1
2008:Q1
2009:Q1
Recession
Source: BEA, NBER / Haver Analytics
2010:Q1
2011:Q1
2012:Q1
2013:Q1
Figure 6
Growth in Government Spending During
Current and Previous Three Recoveries
Index, Trough = 100
130
1982:Q4
1991:Q1
2001:Q4
120
2009:Q2
110
100
90
0
1
2
3
4
5
6
7
8
9
Quarters from Trough
Source: BEA, NBER / Haver Analytics
10
11
12
13
14
15
Figure 7
Nonfarm Payroll Employment Growth:
All Industries and Private Industries
2007:Q1 - 2013:Q1
Percent Change from Year Earlier
3
3.00
2
2.00
1
1.00
0
0.00
-1
-1.00
-2
-2.00
-3
-3.00
-4
-4.00
-5
Series4
Series3
Private Industries
All Industries
-6
-5.00
-6.00
2007:Q1
2008:Q1
2009:Q1
Recession
Source: BLS, NBER / Haver Analytics
2010:Q1
2011:Q1
2012:Q1
2013:Q1
Figure 8
Inflation Rate: Change in Total and Core Personal
Consumption Expenditure (PCE) Price Indexes
January 2007 - March 2013
Percent Change from Year Earlier
5
1
4
1
PCE
3
Target (2%)
2
1
0
Core PCE
(Excluding Food and Energy)
0
1
0
-1
-2
0
Jan-2007
Jan-2008
Jan-2009
Recession
Source: BEA, NBER / Haver Analytics
Jan-2010
Jan-2011
Jan-2012
Jan-2013
Figure 9
Three-Month Treasury Bill Yield Minus
Core PCE Inflation Rate
January 2007 - March 2013
Percent Change from Year Earlier
3
1
2
1
1
1
0
0
-1
0
-2
0
Jan-2007
Jan-2008
Jan-2009
Jan-2010
Jan-2011
Jan-2012
Recession
Note: Core PCE Inflation Rate is the percent change in the Core PCE from one year earlier
Source: BEA, Federal Reserve Board, NBER / Haver Analytics
Jan-2013
Figure 10
Central Bank Assets in the United States,
the United Kingdom and the Euro Area
December 2006 - April 2013
Index Level December 2006 = 100
600
United Kingdom
500
United States
Euro Area (17)
400
300
200
100
0
Dec-2006
Dec-2007
Dec-2008
Dec-2009
Dec-2010
Dec-2011
Source: Bank of England, European Central Bank, Federal Reserve Board / Haver Analytics
Dec-2012
Figure 11
Growth in Real Government Spending in the
United States, the United Kingdom and the Euro Area
2010 - 2012
Percent Change from Year Earlier
3
2010:Q4
2011:Q4
2012:Q4
2
1
0
-1
-2
-3
United States
United Kingdom
Note: Includes only government consumption expenditures.
Source: BEA, Eurostat, Office for National Statistics (U.K.) / Haver Analytics
Euro Area (17)
Figure 12
Estimated General Government
Structural Budget Balance
2010 - 2013
Percent of Potential GDP
0
-3
-6
2010
2011
2012
2013 (Estimate)
-9
United States
United Kingdom
Euro Area (17)
Note: For the Euro area, 2012 is also based on estimates of the budget balance for some countries
Source: IMF, World Economic Outlook Database
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