CONTENTS Summary∴ Economic and Financial Developments Monetary Polic Special Topics Part 1: Recent Economic and Financial Developments Domestic Developments Financial Developments International Developments Part2: Monetary Policy∴∴…∴∴…∴∴……∴∴…∴………33 Part 3: Summary of Economic Projections 47 The Outlook for Economic Activity The Outlook for Inflation Appropriate Monetary Policy Uncertainty and risks 51 Abbreviations List of boxes Employment Disparities between Rural and Urban Areas Developments Related to Financial Stability Monetary Policy Rules and Systematic Monetary Policy The Role of Liabilities in Determining the Size of the Federal Reserves Balance Sheet 41 Federal Reserve Transparency: Rationale and New Initiatives Forecast Uncertainty NOTE: This report reflects information that was publicly available as of noon EST on February 21, 2019 data, January 2019; and, for quarterly data, 2018: Q4 In bar charts, except as noted, the change for a given period is measured to its final quarter from the final quarter of the preceding period For figures 16 and 34, note that the S&P 500 Index and the Dow Jones Bank Index are products of S&P Dow Jones Indices LLC and/or its affiliates and ive been licensed for use by the Board. 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Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any or warranty, express or implied, as to the ability of any index to curately represent the asset class or market sector that it purports to represent, and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included thereinContents Note: This report reflects information that was publicly available as of noon EST on February 21, 2019. Unless otherwise stated, the time series in the figures extend through, for daily data, February 20, 2019; for monthly data, January 2019; and, for quarterly data, 2018:Q4. In bar charts, except as noted, the change for a given period is measured to its final quarter from the final quarter of the preceding period. For figures 16 and 34, note that the S&P 500 Index and the Dow Jones Bank Index are products of S&P Dow Jones Indices LLC and/or its affiliates and have been licensed for use by the Board. Copyright © 2019 S&P Dow Jones Indices LLC, a division of S&P Global, and/or its affiliates. All rights reserved. Redistribution, reproduction, and/or photocopying in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit www.spdji.com. S&P® is a registered trademark of Standard & Poor’s Financial Services LLC, and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent, and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein. Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Economic and Financial Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Monetary Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Special Topics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Part 1: Recent Economic and Financial Developments. . . . . . . . . . . . . . . . . 5 Domestic Developments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Financial Developments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 International Developments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Part 2: Monetary Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Part 3: Summary of Economic Projections. . . . . . . . . . . . . . . . . . . . . . . . . 47 The Outlook for Economic Activity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 The Outlook for Inflation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Appropriate Monetary Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Uncertainty and Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Abbreviations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 List of Boxes Employment Disparities between Rural and Urban Areas. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Developments Related to Financial Stability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Monetary Policy Rules and Systematic Monetary Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 The Role of Liabilities in Determining the Size of the Federal Reserve’s Balance Sheet. . . . . . 41 Federal Reserve Transparency: Rationale and New Initiatives. . . . . . . . . . . . . . . . . . . . . . . . . 45 Forecast Uncertainty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62