Academic literature on the topic 'Federal Open Market Committee'

This project examined the impact of changes in the federal funds rate target on equity prices. The project used ordinary least squares regression to consider the effects of those changes along with corporate profits on stock market value. The goal of the project was to confirm the results of other more narrowly defined studies and in doing so show that the causal relationship is even stronger. The data sets were taken from 1990 through 2006, using the adjusted level of corporate profits and federal funds rate targets as explanatory variables and NYSE and NASDAQ composite indices as dependant variables. The results of this project showed that corporate profits were the largest driver of equity prices, as suggested by current research. It also showed that federal funds rate changes have no impact on equity prices in a direct fashion, because federal funds rate is not the rate directly faced by firms in the market. Overall results did confirm the findings of previous research.

For many years prior to the global financial crisis, the Federal Open Market Committee set a target for the federal funds rate and achieved that target through small purchases and sales of securities in the open market. In the aftermath of the financial crisis, with a superabundant level of reserve balances in the banking system having been created as a result of the Federal Reserve's large-scale asset purchase programs, this approach to implementing monetary policy will no longer work. This paper provides a primer on the Fed's implementation of monetary policy. We use the standard textbook model to illustrate why the approach used by the Federal Reserve before the financial crisis to keep the federal funds rate near the Federal Open Market Committee's target will not work in current circumstances, and explain the approach that the Committee intends to use instead when it decides to begin raising short-term interest rates.

Following its May 2024 meeting, the Federal Open Market Committee (FOMC) announced that it would slow the pace of its balance sheet reduction starting in June 2024. This will allow for a more gradual transition from an abundant to ample supply of reserves. As reserves decline, conditions in money markets, including the federal (fed) funds market, will be important in judging whether the supply of reserves is approaching ample.

In the face of the COVID-19 pandemic in March 2020, the Federal Reserve committed to using its full range of tools to support the U.S. economy. Over the next year and a half, with progress on vaccinations and strong policy support, indicators of economic activity and employment strengthened while inflation moved higher. Faced with a tight labor market and elevated inflation, the Federal Open Market Committee (FOMC) began a process of unwinding the very accommodative stance of monetary policy and moving to a restrictive policy stance to address inflation pressures. Here we review the sequence of actions taken by the Committee between late 2020 and mid-2023 as well as discuss some issues it contemplated along the way; the table provides a chronological list of key events over this period.

Thesis (Ph. D.)--Massachusetts Institute of Technology, Engineering Systems Division, June 2008.
"May 26, 2008."
Includes bibliographical references (p. 152-156).
All ES evolve as the result of stakeholder decisions and decision processes that affect their design and operation. These decision making problems often involve many stakeholders, each of whom have a say in the outcome. This has been termed a lateral alignment problem, as opposed to a unitary decision making problem. Lateral alignment focuses on group decision making where stakeholders are nominally organizationally independent, interact to maximize their own goals and simultaneously a common goal, and who are able to influence decision outcomes to varying degrees through power and influence. Previous work in the relevant literatures has focused on two variants used to assess and model group decision making. Type 0 Group Decision problems involve anonymous voting, where stakeholders do not interact. Type 1 Group Decision problems involve non-cooperative interaction where stakeholders try to maximize their self-interest through negotiation. We define the lateral alignment problem as a Type 2 Group Decision problem, which involve elements of both non-cooperative and cooperative behavior. Type 2 Group Decisions have not been fully treated in the existing literatures. In this thesis, we evaluate a prototype Type 2 Group Decisions: the Federal Open Market Committee (FOMC) from 1970-1994 as a test case. One major advantage of studying the FOMC is the availability of data and relevant analytical published work. Our original empirical findings include: 1. Information ambiguity is the major factor that impacts coalition dynamics, via the number of starting bids, in FOMC decision making. 2. Deliberation time is directly determined by information ambiguity and the relationship is the same across chairmen eras. 3. Decision efficacy falls off gradually as information ambiguity increases.
(cont.) 4. Members whose past views are best reflected as correct in hindsight appear to build up reputation and have greater influence on decision outcomes. We also develop an agent based model (ABM) to study the FOMC. As we show, the ABM is very effective at predicting observables of the FOMC decision making process. These observables are: 1. Membership in the Winning Coalition. 2. Number of Bargaining Rounds. 3. Decision Outcomes. 4. The Number of Starting Bids. In chapter 6 we discuss issues of generalizing the findings of this to other ES. Our sample includes the Food and Drug Administration (FDA), SEMATECH, and the Next Generation Air Transportation System (NGATS).
by Christopher M. Lawson.
Ph.D.

Thesis (Ph. D.)--West Virginia University, 2010.
Title from document title page. Document formatted into pages; contains vii, 138 p. : ill. Includes abstract. Includes bibliographical references (p. 128-132).

This thesis analyses the role of the Euromarket, an offshore market for Eurodollars or expatriate US dollars, in the re-emergence of global finance during the 1960s and 1970s. It charts not only its Cold War origins and the development of various markets for Eurodollars, but also institutions and policies that shaped them from the return to convertibility in 1958 to the ill-fated efforts to regulate the nascent market by international financial institutions. By examining the nature of Eurodollars as both a US and global currency, the thesis sheds light on the changing features of the governance of global finance and its relationship with the economic sovereignty of nation-states. It argues that the Euromarket underwent repeated contestations as politicians, bankers, and economists vested their political ambitions and cultural assumptions in it. The popular, academic, and policy debates challenged the speculative nature of Eurodollars which would destabilise the domestic as well as the international monetary system of the Bretton Woods system. Without a single monetary authority, the tendency of the Euromarket to transcend the order of capitalist nation-states constrained national governments’ capacity to control capital flows and the autonomy of domestic monetary policy. However, nation-states were not impotent but deliberately sought to exploit the liquid pool of capital in Eurodollars. It was not merely the US government that benefited from the seigniorage of Eurodollars and the City of London which was reborn as the international financial centre in the Euromarket. Continental European countries that were hesitant about European economic integration, the UK Labour government, developing countries in the Global South, and even the Communist bloc, resorted to the Euromarket for their national interests. The ambivalent attitudes of national governments and their conflict of interests resulted in the failure of coordinated efforts to introduce the rules of the game but facilitated the transnational network of finance in Eurodollars.

Abstract Why is the committee responsible for defining US monetary policy called the ‘Federal Open Market Committee’ (FOMC) and not ‘Federal Interest Rate Committee’ (FIRC), even though it undisputedly sets and announces a target for the overnight interest rate?

This chapter begins with a discussion of the Federal Reserve and the Federal Reserve Banking System. The Federal Reserve System was created by Congress under the Federal Reserve Act “to provide for the establishment of federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States and for other purposes.” The Federal Reserve System comprises a central Board of Governors appointed by the president of the United States and confirmed by the Senate, and 12 regional Reserve banks. Monetary policy is set by the Federal Open Market Committee (FOMC). The remainder of the chapter covers monetary policy, quantitative easing, balance sheet normalization and the FOMC minutes.

Using archival, textual information from Federal Open Market Committee (FOMC) transcript data as well as FOMC policy statements, chapter 4 demonstrates that when the chair and median member have opposing inflation preferences, the FOMC communicates with greater precision than when the chair and median member have aligned inflation preferences. The author finds this is true, however, when computing the median members able to cast a public vote. The chapter also provides supportive evidence that when committee members are more dissimilar, the number of textual changes to the policy announcement is higher than otherwise. Theoretically, the chapter shows that a combination of members’ preferences and voting rights matter for the level of uncertainty words used in the official policy statement. Methodologically, the chapter demonstrates the innovative use of supervised and unsupervised learning techniques to construct quantitative measures from text as data, applied to central bank committees.

This chapter introduces central bankers as “wordsmiths,” skilled users of words, who work together to construct and edit a monetary policy statement with an intention to drive the economy by shaping the public’s beliefs about the future. The chapter starts off showing that central bankers can be both relatively vague and relatively precise with the language that they use. Baerg highlights previous explanations on the benefits of delegating monetary policy to a monetary policy committee rather than to a single individual. Known benefits include better information aggregation and problem-solving. The author introduces the argument that monetary policy committees that have diverse policy preferences are more likely to be precise and illustrates, using examples from Federal Open Market Committee (FOMC) transcript data, how policy makers bargain over the policy statement in ways similar to how they negotiate changes in interest rates. The chapter concludes with a brief overview of the structure of the manuscript.

The project ‘OERlabs - jointly training student (teachers) for Open Eductional Resources (OER) use’ is funded by the Federal Ministry of Education and Research Germany (BMBF[SH1] ) and aims to sensitize and contextualize OER for all relevant university actors by strategically carrying out an open developmental process. This process includes organizing regular Multi-Stakeholder[SH2] Dialogues (MSD) over the course of the project. This paper briefly outlines the kick-off MSD event, its methodological approach in context of the entire process, i.e. building a base for working on solutions with implicit use of OER-principles and presents the participants feedback and provides results from the event. In contrast to committee work, our MSD-approach provides participants with more spacefor open discussions while still working towards a shared goal. In the context of OER, these events show the importance of focusing on the participants attitudes and mindset, rather than confronting them with general OER-related topics right away, such as licensing and creative commons. The project OERlabs will organize its final MSD in July of 2018, while also documenting additional experiences in an Open Book.

In Australia, 6000 military personnel leave the military each year, of whom at least 30% become unemployed and 19% experience underemployment, figures five times higher than the national average (Australian Government 2020). Believed to be one of life's most intense transitions, veterans find it difficult to align their military skills and knowledge to the civilian labour market upon leaving military service (Cable, Cathcart and Almond 2021; AVEC 2020). // Providing authentic opportunities that allow veterans to gain meaningful employment upon (re)entering civilian life raises their capability to incorporate accrued military skills, knowledge, and expertise. Despite acknowledging that higher education is a valuable transition pathway, Australia has no permanently federally funded post-service higher education benefit supporting veterans to improve their civilian employment prospects. Since World War II, American GIs have accessed a higher education scholarship program (tuition fees, an annual book allowance, monthly housing stipend) (Defense 2019). A similar offering is available in Canada, the UK, and Israel. // We are proposing that the AVSP would be the first comprehensive, in-depth study investigating the ongoing academic success of Australia's modern veterans as they study higher and vocational education. It consists of four distinct components: // Scholarships: transitioning/separated veterans apply for one of four higher education scholarship options (under/postgraduate): 100% tuition fees waived // $750/fortnight living stipend for the degree duration // 50/50 tuition/living stipend // Industry-focused scholarships. // Research: LAS Consulting, Open Door, Flinders University, over seven years, will follow the scholarship recipients to identify which scholarship option is the most relevant/beneficial for Australian veterans. The analysis of the resultant quantitative and qualitative data will demonstrate that providing federal financial support to student veterans studying higher education options: Improves the psychosocial and economic outcomes for veterans // Reduces the need for financial and medical support of participants // Reduces the national unemployed and underemployed statistics for veterans // Provides a positive return of investment (ROI) to the funder // May increase Australian Defence Force (ADF) recruitment and retention rates // Career Construction: LAS Consulting will sit, listen, guide, and help build an emotional connection around purpose, identity, education and employment opportunities back into society. So, the veteran can move forward, crystalise a life worth living, and find their authentic self, which is led by their values in the civilian world. // Mentoring: Each participant receives a mentor throughout their academic journey.

*-2mm Among the many GIS standards that provide interoperability of (geo)spatial data and related web services, we can identify a limited but important group of standards, intended to catalog spatial data sets and services. Many of currently used standards are based on international ISO 19115 series and their national profiles. Among them are two Russian national standards developed by the Technical Committee (TC) 394 Geographic information/Geomatics of the Federal Agency on Technical Regulating and Metrology (Rosstandart): the GOST R 57668-2017 “Spatial data. Metadata. Part 1. Fundamentals” and the GOST R 57656-2017 “Spatial data. Metadata. Part 2. Extensions for imagery and gridded data”. The analysis of Russian, foreign and international geoportals with metadata editing, validation and publishing functions has been carried out, including using ISO 19115, FGDC-STD-001-001-1998, DIF, Dublin Core and open source software GeoNode, GeoNetwork, GeoServer, etc. The results of the analysis can be useful in selecting effective spatial metadata management systems in the scientific geoportals.

In a global world with open knowledge in the extension process, bringing a new idea is a key to economic development, especially when it becomes a real opportunity market. Thus, bringing a new idea is a myth for academic researchers, and recognising and appreciating the actual value of an idea is more ambiguous and depends on the ability of the human brain to avoid prejudice against something they do not know and understand in a limited time. This paper seeks to identify criteria used in evaluating new idea value in business. The potential actors implicated in this process are investors and coach members of the committee project evaluation.

The Study Group on Interactive Media in Image and Sound (GEMInIS) is linked to the Postgraduate Program in Image and Sound, at the Federal University of São Carlos (UFSCar). The group's research lines are articulated in the theoretical and practical perspective of transmedia logic, prioritizing studies on multiplatform audiovisual communication (cinema, TV, video games, VOD, social media, and mobile devices, among others) as a thematic axis. The researchers developed are applied in the production of multiplatform audiovisual content, taking into account the dynamics of media, market and technological ecosystems, with emphasis on: studies on media convergence; structures of streaming platforms; formats and business models of media tech companies and video-on-demand services offered by television broadcasting; local and transnational audiovisual production arrangement; innovative serial fiction strategies; environmental narratives in the context of participatory culture and transmedia design. In this context, the reflections and analyzes on the processes of platforming of contemporary audiovisual incorporate transdisciplinary dialogue, rupture movements, literacy strategies and discussions on public policies for the Brazilian audiovisual sector. From these lines of work, we intend to discuss in this presentation the application domains developed by the group, specific to multiplatform audiovisual communication. (i) Specialization Course in Multiplatform Audiovisual Content Production (EAM) - Specialization course created in 2016, focused on practical applications, with the objective of training qualified specialists to work in the areas of communication, design, and arts, in the development of audiovisual content for platforms, thus expanding the field of professional performance in the audiovisual market. (ii) Post Graduation Program in Multiplatform Audiovisual Communication (PPGCOM) - Professional Master's Degree in Transmedia. Program conceived in the Stricto Senso Post-Professional Graduate Program, which prioritizes applied research based on transmedia logic, with innovative content, processes and projects. The Program requests to develop methodologies and design projects aimed at the development of multiplatform audiovisual communication. (iii) GEMInIS Journal (ISSN: 2179-1465 - Qualis: B2) Online publication, It’s dedicated to the dissemination of articles, reviews of works and on the context of media convergence and audiovisual production in multiple transmedia platforms. The journal can have open access to researchers who want to submit their work. (iv) GEMInIS International Journey (JIG) - Event held since 2014 with the theme of Multiplatform Transmedia Entertainment, with the objective of bringing together research groups that work at the intersection of the areas of communication, design and audiovisual, for the presentation and discussion of the results of their investigations. The presentation of the lines of action of the GEMInIS group try to find to discuss the importance of transmedia logic in the development of methodologies aimed at structured professional performance, based on the relationship between the university, the market, and the social impact of multiplatform communication.

Adult-use cannabis retail storefronts first opened in Massachusetts in November 2018. Forty months later, there are 366 cannabis retailers across the Commonwealth, but it remains unclear which areas have adequate access to safe, regulated (“legal”) cannabis products, and which areas are underserved. In this study, we use open census and retailer data and self-report surveys from Massachusetts residents to estimate access to legal cannabis across Massachusetts. We used populations from the 2020 census and the Cannabis Control Commission’s Licensing data to approximate the cannabis retailer density per 100,000 people in each of Massachusetts’ fourteen counties. Counties were collapsed by Region to provide trend estimates by general geographic location. Cannabis retailer density were highest in Berkshire, Franklin, and Hampshire Counties (Western), and lowest in Norfolk (Southeast), with less than one retailer (0.7) per 100,000 people, followed by Barnstable (Southeast) and Suffolk (Northeast) counties. Massachusetts resident data from the International Cannabis Policy Study (ICPS) for 2019 (N = 2,476) and 2020 (N = 2,207) were used to determine whether the subjective experiences and purchasing behaviors of residents support the results of our objective measure. Binomial regressions were run at the Region-level to lower the risk of Type I error. Participants were first asked why they bought from an illegal rather than legal source, and comparisons were made between Regions based on the amount of individuals answering “Legal sources were too far away.” The Southeast region served as reference group, as it had the lowest retail density and was believed to have more people reporting dispensaries were too far away. Results show that only residents of the Central region [RR .52, CI(.28, .91), p = .031] were less likely to report that legal sources were too far away than Southeast residents. All other regions did not reach significance. We asked participants where they were purchasing their cannabis products and compared the number of residents of each Region that reported purchasing from a “licensed recreational store.” We included Western as the reference group for this model as it was the Region with the highest retail density and was likely home to many residents buying from stores. Residents of Western Massachusetts were significantly more likely to purchase their products from legal stores than residents of the Central [.72, CI(.6, .87), p <.001], Northeast [.74, CI(.64, .86), p<.001], or Southeast [.81, CI(.7,.94), p=.005] Massachusetts. It has been six years since Massachusetts legalized cannabis, yet notable inequities still exist in residents’ access to legal, nonmedical, adult-use cannabis products. Western Massachusetts was the best-served region for cannabis consumers by our estimates, where Southeast Massachusetts remained largely underserved through 2020. These inequities may have implications for cannabis law enforcement in the state, as illicit sources of cannabis could flourish in the absence of easily accessible legal dispensaries. Future work should consider the scope of the illicit market(s) and whether individuals in underserved areas are at higher risk of committing cannabis-related offenses either at the state (distribution) or federal level (trafficking cannabis across state lines).

The Federal Reserve holds two main sets of monetary policy meetings, the “Federal Open Market Committee” (FOMC) and the “Board Meetings”, which gather with sixweek and two week cadence respectively. Cieslak, Morse, and Vissing-Jorgensen (2019) show that the cadence of these meetings is associated with cycles of corresponding frequencies in stock markets. These can be fruitfully exploited through a portfolio strategy that invests in the whole market at alternate weeks (the even-week strategy). This simple investment rule is based on the cycles identified empirically but, so far, lacks a theoretical foundation. In this paper, we provide a rigorous framework to detect cycles in the stock market, and to determine optimal portfolio choices which profit from such cycles. We use the filtering approach for stationary time series of Ortu, Severino, Tamoni, and Tebaldi (2020) to isolate uncorrelated components of stock returns that are precisely associated with two- and six-week cycles. Then, we replicate these components using tradable assets from the U.S. market, and design an optimal portfolio strategy that maximizes the investor’s wealth and outperforms the even-week strategy.

In 2020, ARL’s Advocacy and Public Policy Committee launched a digital rights initiative focused on understanding and safeguarding the full stack of research libraries’ rights: to acquire and lend digital content to fulfill libraries’ functions in research, teaching, and learning; to provide accessible works to people with print disabilities; and to fulfill libraries’ collective preservation function for enduring access to scholarly and cultural works. Our objective is to make sure that these rights are well understood by research libraries, by Congress, by the US Copyright Office, and by the courts. This report discusses licenses and contracts for digital content in the context of the US Copyright Act. The report presents advocacy and public policy strategies, such as rights-saving clauses, open access, state strategies, and federal exemptions. The report concludes with next steps, including a test case and ARL strategies.

Thursday, August 8, 2019 11:00 am ET PRESENTER: Lance Christensen, PhD, NASA Jet Propulsion Laboratory HOST: Francois Rongere, PG and E MODERATOR: Carrie Greaney, PRCI CLICK BUY/DOWNLOAD TO ACCESS WEBINAR REGISTRATION LINK Join the PRCI Surveillance, Operations and Maintenance Technical Committee as they present research, conducted by NASA Jet Propulsion Laboratory (JPL), related to the Open Path Laser Spectrometer (OPLS). New advances in sensor technology, with high sensitivity towards detecting methane and ethane, present the energy pipeline industry with cost effective ways to improve safety, comply with state and federal regulations, decrease natural gas emissions and attribute natural gas indications to thermogenic or biogenic sources. This webinar will present the results of this research that included both laboratory and field testing. Benefits of attending: 1) Learn capability of miniature natural gas sensors 2) Learn how miniature natural gas sensors are applied on drones 3) Learn leak localization and flux measurements using miniature drone sensors Who should attend? Natural gas pipeline operators interested in the application of methane detection using unmanned aircraft systems (UAS) on pipeline operations will find this research especially informative. Recommended pre-reading: PR-459-133750-R02 Fast, Accurate, Automated System to Find and Quantify Natural Gas Leaks

The creation of an intelligent supply chain is now an urgent national security priority that cannot be achieved without the joint mobilization of various stakeholders in Canada. It is not, however, an end in itself: the achievement of a single, competitive, sustainable, and consumer-focused domestic market should be the ultimate outcome of the national taskforce needed to collaboratively implement the recommendations of three complementary public policy reports published in 2022 on the state of the supply chain in Canada. The supply chain challenge is vast, and it will only become more complex over time. Governments in Canada must act together now, in conjunction with collaborative efforts with our allies and partners, notably the United States and the European Union, to ensure supply chain resilience in the face of accelerating current and anticipated upheavals, geopolitical conflicts and natural disasters. Québec's geostrategic position is a major asset, and gives it a critical role and responsibility in implementing not only the Final Report of the National Supply Chain Task Force ("ACT"), but also of the recommendations contained in the report published by the Council of Ministers Responsible for Transportation and Highway Safety (COMT) and those contained in the report of the House of Commons Standing Committee on Transport, Infrastructure and Communities published in Ottawa in November 2022, "Improving the Efficiency and Resilience of Canada's Supply Chains". The mobilizing approach towards a common data space for Canada's supply chain is inspired by Advantage St. Lawrence's forward-looking Smart Economic Corridor vision and builds on and integrates experience gained from various initiatives and programs implemented in Canada, the U.S. and Europe, as appropriate. Its initial implementation in the St. Lawrence - Great Lakes trade corridor will facilitate the subsequent access and sharing of data from across the Canadian supply chain in a reliable and secure manner. The accelerated joint development of a common data space is a game-changer not only in terms of solving critical supply chain challenges, but also in terms of the impetus it will generate in the pursuit of fundamental Canadian priorities, including the energy transition. This Bourgogne report offers a four-part synthesis: - An overview of a background characterized by numerous consultations, strategy announcements, measures, and mixed results. - A cross-analysis of the recommendations of three important and complementary public policy reports at federal level, as well as the Quebec strategy, “l'Avantage Saint-Laurent”. - An analysis of the fundamental issues of mobilization capacity, execution, and under-utilization of data. - Some operational solutions for moving into « Action, Collaboration and Transformation » (ACT) mode.

The 11th edition of The Fed Explained: What the Central Bank Does (formerly The Federal Reserve System Purposes & Functions) details the structure, responsibilities, and work of the U.S. central banking system. The Federal Reserve System performs five functions to promote the effective operation of the U.S. economy and, more generally, to serve the public interest. It includes three key entities: the Board of Governors, 12 Federal Reserve Banks, and the Federal Open Market Committee.

1. Macroeconomic Summary In December, headline inflation (13.1%) and the average of the core inflation measures (10.3%) continued to trend upward, posting higher rates than those estimated by the Central Bank's technical staff and surpassing the market average. Inflation expectations for all terms exceeded the 3.0% target. In that month, every major group in the Consumer Price Index (CPI) registered higher-than-estimated increases, and the diffusion indicators continued to show generalized price hikes. Accumulated exchange rate pressures on prices, indexation to high inflation rates, and several food supply shocks would explain, in part, the acceleration in inflation. All of this is in a context of significant surplus demand, a tight labor market, and inflation expectations at different terms that exceed the 3.0% target. Compared to the October edition of the Monetary Policy Report, the forecast path for headline and core inflation (excluding food and regulated items: EFR) increased (Graphs 1.1 and 1.2), reflecting heightened accumulated exchange rate pressures, price indexation to a higher inflation rate (CPI and the producer price index: PPI), and the rise in labor costs attributed to a larger-than-estimated adjustment in the minimum wage. Nevertheless, headline inflation is expected to begin to ease by early 2023, although from a higher level than had been estimated in October. This would be supported initially by the slowdown forecast for the food CPI due to a high base of comparison, the end anticipated for the shocks that have affected the prices of these products, and the estimated improvement in external and domestic supply in this sector. In turn, the deterioration in real household income because of high inflation and the end of the effects of pent-up demand, plus tighter external and domestic financial conditions would contribute to diluting surplus demand in 2023 and reducing inflation. By the end of 2023, both headline and core (EFR) inflation would reach 8.7% and would be 3.5% and 3.8%, respectively, by December 2024. These forecasts are subject to a great deal of uncertainty, especially concerning the future behavior of international financial conditions, the evolution of the exchange rate, the pace of adjustment in domestic demand, the extent of indexation of nominal contracts, and the decisions taken regarding the domestic price of fuel and electricity. In the third quarter, economic activity surprised again on the upside and the growth projection for 2022 rose to 8.0% (previously 7.9%). However, it declined to 0.2% for 2023 (previously 0.5%). With this, surplus demand continues to be significant and is still expected to weaken during the current year. Annual economic growth in the third quarter (7.1 % SCA)1 was higher than estimated in October (6.4 % SCA), given stronger domestic demand specifically because of higher-than-expected investment. Private consumption fell from the high level witnessed a quarter earlier and net exports registered a more negative contribution than anticipated. For the fourth quarter, economic activity indicators suggest that gross domestic product (GDP) would have remained high and at a level similar to that observed in the third quarter, with an annual variation of 4.1%. Domestic demand would have slowed in annual terms, although at levels that would have remained above those for output, mainly because of considerable private consumption. Investment would have declined slightly to a value like the average observed in 2019. The real trade deficit would have decreased due to a drop in imports that was more pronounced than the estimated decline in exports. On the forecast horizon, consumption is expected to decline from current elevated levels, partly because of tighter domestic financial conditions and a deterioration in real income due to high inflation. Investment would also weaken and return to levels below those seen before the pandemic. In real terms, the trade deficit would narrow due to a lower momentum projection for domestic demand and higher cumulative real depreciation. In sum, economic growth for all of 2022, 2023, and 2024 would stand at 8.0%, 0.2% and 1.0%, respectively (Graph 1.3). Surplus demand remains high (as measured by the output gap) and is expected to decline in 2023 and could turn negative in 2024 (Graph 1.4). Although the macroeconomic forecast includes a marked slowdown in the economy, an even greater adjustment in domestic absorption cannot be ruled out due to the cumulative effects of tighter external and domestic financial conditions, among other reasons. These estimates continue to be subject to a high degree of uncertainty, which is associated with factors such as global political tensions, changes in international interest rates and their effects on external demand, global risk aversion, the effects of the approved tax reform, the possible impact of reforms announced for this year (pension, health, and labor reforms, among others), and future measures regarding hydrocarbon production. In 2022, the current account deficit would have been high (6.3 % of GDP), but it would be corrected significantly in 2023 (to 3.9 % of GDP) given the expected slowdown in domestic demand. Despite favorable terms of trade, the high external imbalance that would occur during 2022 would be largely due to domestic demand growth, cost pressures associated with high freight rates, higher external debt service payments, and good performance in terms of the profits of foreign companies.2 By 2023, the adjustment in domestic demand would be reflected in a smaller current account deficit especially due to fewer imports, a global moderation in prices and cost pressures, and a reduction in profits remitted abroad by companies with foreign direct investment (FDI) focused on the local market. Despite this anticipated correction in the external imbalance, its level as a percentage of GDP would remain high in the context of tight financial conditions. In the world's main economies, inflation forecasts and expectations point to a reduction by 2023, but at levels that still exceed their central banks' targets. The path anticipated for the Federal Reserve (Fed) interest rate increased and the forecast for global growth continues to be moderate. In the fourth quarter of 2022, logistics costs and international prices for some foods, oil and energy declined from elevated levels, bringing downward pressure to bear on global inflation. Meanwhile, the higher cost of financing, the loss of real income due to high levels of global inflation, and the persistence of the war in Ukraine, among other factors, have contributed to the reduction in global economic growth forecasts. In the United States, inflation turned out to be lower than estimated and the members of the Federal Open Market Committee (FOMC) reduced the growth forecast for 2023. Nevertheless, the actual level of inflation in that country, its forecasts, and expectations exceed the target. Also, the labor market remains tight, and fiscal policy is still expansionary. In this environment, the Fed raised the expected path for policy interest rates and, with this, the market average estimates higher levels for 2023 than those forecast in October. In the region's emerging economies, country risk premia declined during the quarter and the currencies of those countries appreciated against the US dollar. Considering all the above, for the current year, the Central Bank's technical staff increased the path estimated for the Fed's interest rate, reduced the forecast for growth in the country's external demand, lowered the expected path of oil prices, and kept the country’s risk premium assumption high, but at somewhat lower levels than those anticipated in the previous Monetary Policy Report. Moreover, accumulated inflationary pressures originating from the behavior of the exchange rate would continue to be important. External financial conditions facing the economy have improved recently and could be associated with a more favorable international context for the Colombian economy. So far this year, there has been a reduction in long-term bond interest rates in the markets of developed countries and an increase in the prices of risky assets, such as stocks. This would be associated with a faster-than-expected reduction in inflation in the United States and Europe, which would allow for a less restrictive course for monetary policy in those regions. In this context, the risks of a global recession have been reduced and the global appetite for risk has increased. Consequently, the risk premium continues to decline, the Colombian peso has appreciated significantly, and TES interest rates have decreased. Should this trend consolidate, exchange rate inflationary pressures could be less than what was incorporated into the macroeconomic forecast. Uncertainty about external forecasts and their impact on the country remains high, given the unpredictable course of the war in Ukraine, geopolitical tensions, local uncertainty, and the extensive financing needs of the Colombian government and the economy. High inflation with forecasts and expectations above 3.0%, coupled with surplus demand and a tight labor market are compatible with a contractionary stance on monetary policy that is conducive to the macroeconomic adjustment needed to mitigate the risk of de-anchoring inflation expectations and to ensure that inflation converges to the target. Compared to the forecasts in the October edition of the Monetary Policy Report, domestic demand has been more dynamic, with a higher observed level of output exceeding the productive capacity of the economy. In this context of surplus demand, headline and core inflation continued to trend upward and posted surprising increases. Observed and expected international interest rates increased, the country’s risk premia lessened (but remains at high levels), and accumulated exchange rate pressures are still significant. The technical staff's inflation forecast for 2023 increased and inflation expectations remain well above 3.0%. All in all, the risk of inflation expectations becoming unanchored persists, which would accentuate the generalized indexation process and push inflation even further away from the target. This macroeconomic context requires consolidating a contractionary monetary policy stance that aims to meet the inflation target within the forecast horizon and bring the economy's output to levels closer to its potential. 1.2 Monetary Policy Decision At its meetings in December 2022 and January 2023, Banco de la República’s Board of Directors (BDBR) agreed to continue the process of normalizing monetary policy. In December, the BDBR decided by a majority vote to increase the monetary policy interest rate by 100 basis points (bps) and in its January meeting by 75 bps, bringing it to 12.75% (Graph 1.5). 1/ Seasonally and calendar adjusted. 2/ In the current account aggregate, the pressures for a higher external deficit come from those companies with FDI that are focused on the domestic market. In contrast, profits in the mining and energy sectors are more than offset by the external revenue they generate through exports. Box 1 - Electricity Rates: Recent Developments and Indexation. Author: Édgar Caicedo García, Pablo Montealegre Moreno and Álex Fernando Pérez Libreros Box 2 - Indicators of Household Indebtedness. Author: Camilo Gómez y Juan Sebastián Mariño

In the second quarter, annual inflation (9.67%), the technical staff’s projections and its expectations continued to increase, remaining above the target. International cost shocks, accentuated by Russia's invasion of Ukraine, have been more persistent than projected, thus contributing to higher inflation. The effects of indexation, higher than estimated excess demand, a tighter labor market, inflation expectations that continue to rise and currently exceed 3%, and the exchange rate pressures add to those described above. High core inflation measures as well as in the producer price index (PPI) across all baskets confirm a significant spread in price increases. Compared to estimates presented in April, the new forecast trajectory for headline and core inflation increased. This was partly the result of greater exchange rate pressure on prices, and a larger output gap, which is expected to remain positive for the remainder of 2022 and which is estimated to close towards yearend 2023. In addition, these trends take into account higher inflation rate indexation, more persistent above-target inflation expectations, a quickening of domestic fuel price increases due to the correction of lags versus the parity price and higher international oil price forecasts. The forecast supposes a good domestic supply of perishable foods, although it also considers that international prices of processed foods will remain high. In terms of the goods sub-basket, the end of the national health emergency implies a reversal of the value-added tax (VAT) refund applied to health and personal hygiene products, resulting in increases in the prices of these goods. Alternatively, the monetary policy adjustment process and the moderation of external shocks would help inflation and its expectations to begin to decrease over time and resume their alignment with the target. Thus, the new projection suggests that inflation could remain high for the second half of 2022, closing at 9.7%. However, it would begin to fall during 2023, closing the year at 5.7%. These forecasts are subject to significant uncertainty, especially regarding the future behavior of external cost shocks, the degree of indexation of nominal contracts and decisions made regarding the domestic price of fuels. Economic activity continues to outperform expectations, and the technical staff’s growth projections for 2022 have been revised upwards from 5% to 6.9%. The new forecasts suggest higher output levels that would continue to exceed the economy’s productive capacity for the remainder of 2022. Economic growth during the first quarter was above that estimated in April, while economic activity indicators for the second quarter suggest that the GDP could be expected to remain high, potentially above that of the first quarter. Domestic demand is expected to maintain a positive dynamic, in particular, due to the household consumption quarterly growth, as suggested by vehicle registrations, retail sales, credit card purchases and consumer loan disbursement figures. A slowdown in the machinery and equipment imports from the levels observed in March contrasts with the positive performance of sales and housing construction licenses, which indicates an investment level similar to that registered for the first three months of the year. International trade data suggests the trade deficit would be reduced as a consequence of import levels that would be lesser than those observed in the first quarter, and stable export levels. For the remainder of the year and 2023, a deceleration in consumption is expected from the high levels seen during the first half of the year, partially as a result of lower repressed demand, tighter domestic financial conditions and household available income deterioration due to increased inflation. Investment is expected to continue its slow recovery while remaining below pre-pandemic levels. The trade deficit is expected to tighten due to projected lower domestic demand dynamics, and high prices of oil and other basic goods exported by the country. Given the above, economic growth in the second quarter of 2022 would be 11.5%, and for 2022 and 2023 an annual growth of 6.9% and 1.1% is expected, respectively. Currently, and for the remainder of 2022, the output gap would be positive and greater than that estimated in April, and prices would be affected by demand pressures. These projections continue to be affected by significant uncertainty associated with global political tensions, the expected adjustment of monetary policy in developed countries, external demand behavior, changes in country risk outlook, and the future developments in domestic fiscal policy, among others. The high inflation levels and respective expectations, which exceed the target of the world's main central banks, largely explain the observed and anticipated increase in their monetary policy interest rates. This environment has tempered the growth forecast for external demand. Disruptions in value chains, rising international food and energy prices, and expansionary monetary and fiscal policies have contributed to the rise in inflation and above-target expectations seen by several of Colombia’s main trading partners. These cost and price shocks, heightened by the effects of Russia's invasion of Ukraine, have been more prevalent than expected and have taken place within a set of output and employment recovery, variables that in some countries currently equal or exceed their projected long-term levels. In response, the U.S. Federal Reserve accelerated the pace of the benchmark interest rate increase and rapidly reduced liquidity levels in the money market. Financial market actors expect this behavior to continue and, consequently, significantly increase their expectations of the average path of the Fed's benchmark interest rate. In this setting, the U.S. dollar appreciated versus the peso in the second quarter and emerging market risk measures increased, a behavior that intensified for Colombia. Given the aforementioned, for the remainder of 2022 and 2023, the Bank's technical staff increased the forecast trajectory for the Fed's interest rate and reduced the country's external demand growth forecast. The projected oil price was revised upward over the forecast horizon, specifically due to greater supply restrictions and the interruption of hydrocarbon trade between the European Union and Russia. Global geopolitical tensions, a tightening of monetary policy in developed economies, the increase in risk perception for emerging markets and the macroeconomic imbalances in the country explain the increase in the projected trajectory of the risk premium, its trend level and the neutral real interest rate1. Uncertainty about external forecasts and their consequent impact on the country's macroeconomic scenario remains high, given the unpredictable evolution of the conflict between Russia and Ukraine, geopolitical tensions, the degree of the global economic slowdown and the effect the response to recent outbreaks of the pandemic in some Asian countries may have on the world economy. This macroeconomic scenario that includes high inflation, inflation forecasts, and expectations above 3% and a positive output gap suggests the need for a contractionary monetary policy that mitigates the risk of the persistent unanchoring of inflation expectations. In contrast to the forecasts of the April report, the increase in the risk premium trend implies a higher neutral real interest rate and a greater prevailing monetary stimulus than previously estimated. For its part, domestic demand has been more dynamic, with a higher observed and expected output level that exceeds the economy’s productive capacity. The surprising accelerations in the headline and core inflation reflect stronger and more persistent external shocks, which, in combination with the strength of aggregate demand, indexation, higher inflation expectations and exchange rate pressures, explain the upward projected inflation trajectory at levels that exceed the target over the next two years. This is corroborated by the inflation expectations of economic analysts and those derived from the public debt market, which continued to climb and currently exceed 3%. All of the above increase the risk of unanchoring inflation expectations and could generate widespread indexation processes that may push inflation away from the target for longer. This new macroeconomic scenario suggests that the interest rate adjustment should continue towards a contractionary monetary policy landscape. 1.2. Monetary policy decision Banco de la República’s Board of Directors (BDBR), at its meetings in June and July 2022, decided to continue adjusting its monetary policy. At its June meeting, the BDBR decided to increase the monetary policy rate by 150 basis points (b.p.) and its July meeting by majority vote, on a 150 b.p. increase thereof at its July meeting. Consequently, the monetary policy interest rate currently stands at 9.0% . 1 The neutral real interest rate refers to the real interest rate level that is neither stimulative nor contractionary for aggregate demand and, therefore, does not generate pressures that lead to the close of the output gap. In a small, open economy like Colombia, this rate depends on the external neutral real interest rate, medium-term components of the country risk premium, and expected depreciation. Box 1: A Weekly Indicator of Economic Activity for Colombia Juan Pablo Cote Carlos Daniel Rojas Nicol Rodriguez Box 2: Common Inflationary Trends in Colombia Carlos D. Rojas-Martínez Nicolás Martínez-Cortés Franky Juliano Galeano-Ramírez Box 3: Shock Decomposition of 2021 Forecast Errors Nicolás Moreno Arias