2018 Supervisory Scenarios for Annual Stress Tests Required under the Dodd-Frank Act Stress Testing Rules and the Capital Plan Rule, February 2018

2018 Supervisory Scenarios for

Annual Stress Tests Required under

the Dodd-Frank Act Stress Testing

Rules and the Capital Plan Rule

February 2018

B O A R D O F G O V E R N O R S O F T H E F E D E R A L R E S E R V E S Y S T E M

2018 Supervisory Scenarios for

Annual Stress Tests Required under

the Dodd-Frank Act Stress Testing

Rules and the Capital Plan Rule

February 2018

B O A R D O F G O V E R N O R S O F T H E F E D E R A L R E S E R V E S Y S T E M

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Introduction

............................................................................................................................... 1

Supervisory Scenarios

............................................................................................................ 3

Baseline, Adverse, and Severely Adverse Scenarios ..................................................................... 3

Global Market Shock Component for Supervisory Adverse and Severely Adverse

Scenarios ........................................................................................................................... 6

Counterparty Default Component for Supervisory Adverse and Severely Adverse

Scenarios ........................................................................................................................... 7

Market Risk Components for Supervisory Adverse and Severely Adverse Scenarios for

IHCs .................................................................................................................................. 7

Variables for the Supervisory Scenarios

........................................................................... 9

iii

Contents

Introduction

The Dodd-Frank Wall Street Reform and Consumer

Protection Act requires the Board of Governors of

the Federal Reserve System (Board) to conduct an

annual supervisory stress test of bank holding com-

panies (BHCs) and U.S. intermediate holding com-

panies of foreign banking organizations (IHCs) (col-

lectively, firms) with $50 billion or greater in total

consolidated assets, and to require firms and state

member banks with total consolidated assets of

more than $10 billion to conduct company-run stress

tests at least once a year.

This publication describes

the three supervisory scenarios—baseline, adverse,

and severely adverse—that the Board will use in its

supervisory stress test this year; that a firm or state

member bank must use in conducting its annual

company-run stress test; and that a firm must use to

estimate projected revenues, losses, reserves, and pro

forma capital levels as part of its 2018 capital plan

submission.

The publication also details additional

components that the largest and most complex firms

will be required to incorporate into the supervisory

scenarios—the global market shock component and

the counterparty default component—and the addi-

tional scenario components to which certain IHCs

will be subject (market risk components).

12 U.S.C. 5365(i).

See 12 CFR 252.14(b), 12 CFR 252.54(b), and 12 CFR 225.8.

Supervisory Scenarios

The adverse and severely adverse scenarios describe

hypothetical sets of conditions designed to assess the

strength of banking organizations and their resilience

to adverse economic environments. The baseline sce-

nario follows a profile similar to the average projec-

tions from a survey of economic forecasters. The sce-

narios are not forecasts of the Federal Reserve.

The scenarios start in the first quarter of 2018 and

extend through the first quarter of 2021. Each sce-

nario includes 28 variables; this set of variables is the

same as the set provided in last year’s supervisory

scenarios. The variables describing economic devel-

opments within the United States include:

•

Six measures of economic activity and prices: per-

cent changes (at an annual rate) in real and nomi-

nal gross domestic product (GDP); the unemploy-

ment rate of the civilian non-institutional popula-

tion aged 16 years and over; percent changes (at an

annual rate) in real and nominal disposable per-

sonal income; and the percent change (at an annual

rate) in the consumer price index (CPI);

•

Four aggregate measures of asset prices or financial

conditions: indexes of house prices, commercial real

estate prices, equity prices, and U.S. stock market

volatility; and

•

Six measures of interest rates: the rate on the

3-month Treasury bill; the yield on the 5-year

Treasury bond; the yield on the 10-year Treasury

bond; the yield on a 10-year BBB corporate secu-

rity; the interest rate associated with a conforming,

conventional, 30-year fixed-rate mortgage; and the

prime rate.

The variables describing international economic con-

ditions in each scenario include three variables in

four countries or country blocks:

•

The three variables for each country or country

block: the percent change (at an annual rate) in real

GDP, the percent change (at an annual rate) in the

CPI or local equivalent, and the level of the U.S.

dollar exchange rate.

•

The four countries or country blocks included: the

euro area (the 19 European Union member states

that have adopted the euro as their common cur-

rency), the United Kingdom, developing Asia (the

nominal GDP-weighted aggregate of China, India,

South Korea, Hong Kong Special Administrative

Region, and Taiwan), and Japan.

Baseline, Adverse, and Severely

Adverse Scenarios

The following sections describe the baseline, adverse,

and severely adverse scenarios. The variables

included in these scenarios are provided in tables at

the end of this document. They can also be down-

loaded (together with the historical time series of the

variables) from the Board’s website, at www

.federalreserve.gov/bankinforeg/dfa-stress-tests.htm

Historical data for the domestic and the international

variables are reported in

Tables 1.A and 1.B,

respectively.

Baseline Scenario

The baseline outlook for U.S. real activity, inflation,

and interest rates (see

Table 2.A) is similar to the

January 2018 consensus projections from Blue Chip

Economic Indicators.

This scenario does not repre-

sent the forecast of the Federal Reserve.

The baseline scenario for the United States is a mod-

erate economic expansion through the projection

period. Real GDP grows on average between 2 and

2½ percent over the scenario period, with slightly

stronger growth during 2018. The unemployment

rate falls below 4 percent in the second half of 2018,

For more on the Federal Reserve’s framework for designing sce-

narios for stress testing, see 12 CFR 252, Appendix A.

See Wolters Kluwer Legal and Regulatory Solutions (2018),

“Blue Chip Economic Indicators,” vol. 43, no. 1 (January 10).

remains below 4 percent through the first half of

2020, and rises to a little above 4 percent thereafter.

CPI inflation averages 2 percent in 2018 and 2¼ per-

cent through the end of the scenario period.

Accompanying the moderate economic expansion,

Treasury yields are assumed to rise modestly across

the maturity spectrum for most of the scenario

period before leveling off. Short-term Treasury rates

increase from about 1½ percent at the beginning of

2018 to about 2½ percent by the second half of

2019, while yields on 10-year Treasury securities rise

from 2½ percent to about 3½ percent by the begin-

ning of 2020. The prime rate increases in line with

short-term Treasury rates and mortgage rates rise in

line with long-term Treasury yields. Reflecting steady

growth and stable economic conditions, spreads

between yields on investment-grade corporate bonds

and yields on long-term Treasury securities widen

only slightly over the scenario period. Equity prices

rise about 5 percent on average each year over the

scenario period. Equity market volatility rises mod-

estly. Nominal house prices rise about 2½ percent in

2018 and 2019, and an average of about 3 percent

per year thereafter. Commercial real estate prices rise

about 5 percent in 2018 and 2019, and an average of

about 3 percent per year through the end of the sce-

nario period.

The baseline scenario for international variables (see

Table 2.B) is similar to that reported in the Janu-

ary 2018 Blue Chip Economic Indicators and the

International Monetary Fund’s October 2017 World

Economic Outlook.

It features an expansion in inter-

national economic activity, albeit one that proceeds

at different rates in the four countries or country

blocks under consideration. Real GDP growth in

developing Asia averages about 6 percent in 2018,

slowing slightly to about 5¾ percent per year

through the end of the scenario period; similarly, real

GDP growth in Japan averages about 1¼ percent in

2018 and slows to slightly less than 1 percent by the

end of 2019; real GDP growth in the euro area aver-

ages slightly above 2 percent in 2018 and slows

gradually to 1½ percent at the end of the scenario

period. Finally, growth in the United Kingdom aver-

ages about 1½ percent per year through the scenario

period.

Adverse Scenario

The adverse scenario is characterized by weakening

economic activity across all of the economies

included in the scenario. This economic downturn is

accompanied by rapid declines in long-term rates

and flattening yield curves in the United States and

the four countries/country blocks in the scenario. It

is important to note that this is a hypothetical sce-

nario designed to assess the strength of banking

organizations and their resilience to adverse eco-

nomic conditions. This scenario does not represent a

forecast of the Federal Reserve.

In the adverse scenario, the U.S. economy experi-

ences a moderate recession that begins in the first

quarter of 2018 (see

Table 3.A). Real GDP falls

slightly more than 2¼ percent from the pre-recession

peak in the fourth quarter of 2017 to the recession

trough in the first quarter of 2019, while the unem-

ployment rate rises steadily, peaking at 7 percent in

the third quarter of 2019. The U.S. recession is

accompanied by an initial fall in inflation in the first

two quarters of 2018. The rate of increase in con-

sumer prices then rises steadily before leveling off at

around 2 percent by the second half of 2019.

Reflecting weak economic conditions, short-term

interest rates in the United States decline to nearly

zero, where they remain for the rest of the scenario

period. Yields on 10-year Treasury securities drop to

around ¾ of a percent in the first quarter of 2018 as

the yield curve flattens, and then gradually rise to

slightly less than 2 percent by the end of the sce-

nario. Financial conditions tighten for corporations

and households during the recession. Spreads

between investment-grade corporate bond yields and

10-year Treasury yields gradually rise to about

3¾ percentage points by early 2019, while spreads

between mortgage rates and 10-year Treasury yields

widen to about 2¾ percentage points over the same

period.

Asset prices decline in the adverse scenario. Equity

prices fall approximately 30 percent by early 2019,

accompanied by a rise in equity market volatility.

Nominal house prices and commercial real estate

prices experience sustained declines; house prices fall

12 percent and commercial real estate prices fall

15 percent by the first quarter of 2020.

Following the recession, U.S. real activity picks up

slowly at first and then gains momentum; growth in

U.S. real GDP increases from ¾ of a percent in

See International Monetary Fund (2017), "World Economic

Outlook,"

www.imf.org/en/Publications/WEO/Issues/2017/09/

19/world-economic-outlook-october-2017

4 Federal Reserve Supervisory Scenarios

2019 to about 3 percent in 2020. The unemployment

rate declines modestly, to about 6¼ percent by the

end of the scenario period. Consumer price inflation

remains at roughly 2 percent through the end of the

scenario period. Yields on 10-year Treasury securi-

ties continue to rise gradually to slightly less than

2 percent by the end of the scenario period.

Outside of the United States, the adverse scenario

features moderate recessions in the euro area and the

United Kingdom, a pronounced and protracted

recession in Japan, as well as below-trend growth in

developing Asia (see

Table 3.B). Weakness in global

demand results in slowing inflation in all of the for-

eign economies under consideration and the onset of

deflationary episodes in Japan and—more mod-

estly—developing Asia. Reflecting flight-to-safety

capital flows, the U.S. dollar appreciates against the

euro, the pound sterling, and the currencies of devel-

oping Asia. The dollar depreciates modestly against

the yen, also in line with flight-to-safety capital

flows.

Comparison of the 2018 Adverse Scenario and

the 2017 Adverse Scenario

The main difference relative to the 2017 adverse sce-

nario is that this year’s adverse scenario features

lower long-term interest rates and a flatter yield

curve across all of the economies included in the sce-

nario. This different profile of interest rates is associ-

ated with a less pronounced decline in the U.S.

equity price index in this year’s scenario.

Additional Key Features of the Adverse

Scenario

As in last year’s adverse scenario, the slowdown in

euro area economic activity reflects a broad-based

contraction in euro area demand, not a contraction

that is concentrated in a few specific economies.

Similarly, the slowdown in developing Asia reflects a

weakening in economic conditions across emerging

market economies, not merely a weakening in Asia-

specific conditions. Declines in aggregate U.S. resi-

dential real estate prices and commercial real estate

prices should be assumed to be concentrated in

regions that have experienced rapid price gains over

the past two years. Declines in prices of U.S. housing

and commercial real estate should also be assumed to

be representative of risks to house prices and com-

mercial real estate prices in foreign regions and

economies that have experienced rapid price gains

over the past two years.

Severely Adverse Scenario

The severely adverse scenario is characterized by a

severe global recession that is accompanied by a

global aversion to long-term fixed-income assets. As

a result, long-term rates do not fall and yield curves

steepen in the United States and the four countries/

country blocks in the scenario. In turn, these devel-

opments lead to a broad-based and deep correction

in asset prices—including in the corporate bond and

real estate markets. It is important to note that this is

a hypothetical scenario designed to assess the

strength of banking organizations and their resil-

ience to unfavorable economic conditions. This sce-

nario does not represent a forecast of the Federal

Reserve.

In this scenario, the level of U.S. real GDP begins to

decline in the first quarter of 2018 and reaches a

trough in the third quarter of 2019 that is 7½ percent

below the pre-recession peak (see

Table 4.A). The

unemployment rate increases almost 6 percentage

points, to 10 percent, by the third quarter of 2019.

Headline consumer price inflation falls below 1 per-

cent at an annual rate in the second quarter of 2018

and rises to about 1½ percent at an annual rate by

the end of the scenario.

As a result of the severe decline in real activity,

short-term Treasury rates fall and remain near zero

through the end of the scenario period. However,

investor aversion to long-term fixed-income assets

keeps 10-year Treasury yields unchanged through the

scenario period. Financial conditions in corporate

and real estate lending markets are stressed severely.

The spread between yields on investment-grade cor-

porate bonds and yields on long-term Treasury secu-

rities widens to 5¾ percentage points by the start of

2019, while the spread between mortgage rates and

10-year Treasury yields widens to about 3½ percent-

age points over the same time period.

Asset prices drop sharply in this scenario. Equity

prices fall 65 percent by early 2019, accompanied by

a surge in equity market volatility. The VIX moves

above 60 percent in the first half of 2018. Real estate

prices also experience large declines, with house

prices and commercial real estate prices falling

30 percent and 40 percent, respectively, by the third

quarter of 2019.

The international component of this scenario fea-

tures a sharp global downturn, with severe recessions

in the euro area, the United Kingdom, and Japan

February 2018 5

and a shallow and brief recession in developing Asia

(see

Table 4.B). As a result of the sharp contraction

in economic activity, all foreign economies included

in the scenario experience a decline in consumer

prices, with Japan experiencing a more significant

deflation that persists through the end of the sce-

nario period. As in this year’s adverse scenario, the

U.S. dollar appreciates against the euro, the pound

sterling, and the currencies of developing Asia but

depreciates modestly against the yen because of

flight-to-safety capital flows.

Comparison of the 2018 Severely Adverse

Scenario and the 2017 Severely Adverse

Scenario

This year’s severely adverse scenario features a more

severe downturn in the U.S. economy as compared to

last year’s scenario. This increase in severity reflects

the Federal Reserve’s scenario design framework for

stress testing, which includes elements that create a

more severe test of the resilience of large firms when

current economic conditions are especially strong.

Under this framework, the unemployment rate in the

severely adverse scenario will reach a peak of at least

10 percent, which leads to a progressively greater

increase in the unemployment rate if the starting

unemployment rate is below 6 percent. Furthermore,

this year’s scenario incorporates a steepening of the

yield curve and a deeper correction in prices for a

broad set of assets, including equities, housing, and

commercial real estate. The international dimension

of the scenario shows a recessionary episode that,

relative to last year’s scenario, is more severe in

developing Asia and Japan but less severe in the euro

area and the United Kingdom.

Additional Key Features of the Severely

Adverse Scenario

As in the adverse scenario, the weakness in euro area

economic conditions reflects a broad-based contrac-

tion in euro area demand, although this contraction

should be assumed to be more protracted in coun-

tries with less room for fiscal policy stabilization.

The sharp slowdown in developing Asia is distrib-

uted unevenly across countries, with more pro-

nounced decelerations in the larger economies. Eco-

nomic conditions in developing Asia should be

assumed to be representative of conditions across

emerging market economies.

As in the adverse scenario, declines in aggregate U.S.

residential real estate prices and commercial real

estate prices should be assumed to be concentrated

in regions that have experienced rapid price gains

over the past two years. Declines in prices of U.S.

housing and commercial real estate should also be

assumed to be representative of risks to house prices

and commercial real estate prices in foreign regions

and economies that have experienced rapid price

gains over the past two years.

Global Market Shock Component for

Supervisory Adverse and Severely

Adverse Scenarios

The global market shock is a set of instantaneous,

hypothetical shocks to a large set of risk factors.

Generally, these shocks involve large and sudden

changes in asset prices, interest rates, and spreads,

reflecting general market distress and heightened

uncertainty.

Firms with significant trading activity

will be required to include the global market shock

as part of their supervisory adverse and severely

adverse scenarios.

In addition, as discussed below,

certain large and highly interconnected firms must

apply the same global market shock to their counter-

party exposures to project losses under the counter-

party default scenario component. The as-of date for

the global market shock is December 4, 2017.

2018 Adverse Scenario

The global market shock component for the adverse

scenario simulates a marked decline in the economic

outlook for developing Asian markets. As a result,

sovereign credit spreads widen and currencies gener-

ally depreciate significantly in these markets. This

shock spreads to other global markets, which results

See 12 CFR 252, Appendix A.

The global market shock component consists of shocks to a

large number of risk factors that include a wide range of finan-

cial market variables that affect asset prices, such as a credit

spread or the yield on a bond, and also include, in some cases,

shocks to the value of the position itself (for example, the mar-

ket value of private-equity positions).

For this cycle, six BHCs are subject to the global market shock

component: Bank of America Corporation; Citigroup Inc.; The

Goldman Sachs Group, Inc.; JPMorgan Chase & Co.; Morgan

Stanley; and Wells Fargo & Company. See 12 CFR

252.54(b)(2)(i).

A firm may use data as of the date that corresponds to its

weekly internal risk reporting cycle as long as it falls during the

business week of the as-of date for the global market shock

(i.e., December 4-8, 2017). Losses from the global market shock

will be assumed to occur in the first quarter of the planning

horizon.

6 Federal Reserve Supervisory Scenarios

in increases in general risk premiums and credit risk.

U.S. interest rates move lower across the term struc-

ture. Due to a sharp reduction in demand from

developing Asia, most global commodity prices and

currencies of commodity exporters decline signifi-

cantly. Equity markets decline broadly.

The major difference relative to the 2017 adverse sce-

nario is a regional focus on developing Asia markets.

In general, the 2018 adverse scenario includes larger

changes in price, spread, and volatility levels across

most markets.

2018 Severely Adverse Scenario

The global market shock component for the severely

adverse scenario is designed around three main ele-

ments: a sudden sharp increase in general risk premia

and credit risk; a rise and steepening of the U.S.

yield curve; and a general selloff of U.S. assets rela-

tive to other developed countries. Markets that are

more tightly linked to interest rates are more acutely

affected. As an example, in general, corporate debt,

RMBS and CMBS markets are more severely

affected than U.S. equities. Some markets less closely

linked to interest rates experience conditions that are

generally comparable to the second half of 2008.

Globally, yield curves for government bonds of most

developed countries undergo moderate tightening

due to outflows from U.S. asset markets. The U.S.

yield curve rises across the term structure, particu-

larly at the long end. Emerging market yield curves

generally rise due to heightened risk premiums. The

U.S. dollar depreciates relative to other developed

market currencies due to investor outflows.

The major differences relative to the 2017 severely

adverse scenario include a rise and steepening of the

U.S. yield curve; greater depreciation of U.S. dollar

relative to other advanced currencies; and more

muted shocks to some credit-sensitive assets, such as

non-agency RMBS. These differences are intended to

reflect a general selloff in U.S. markets—combined

with a less severe stress to illiquid assets.

Counterparty Default Component

for Supervisory Adverse and Severely

Adverse Scenarios

The eight BHCs with substantial trading or custodial

operations will be required to incorporate a counter-

party default scenario component into their supervi-

sory adverse and severely adverse stress scenarios for

CCAR 2018.

The counterparty default scenario

component involves the instantaneous and unex-

pected default of the BHC’s largest counterparty.

In connection with the counterparty default scenario

component, these BHCs will be required to estimate

and report the potential losses and related effects on

capital associated with the instantaneous and unex-

pected default of the counterparty that would gener-

ate the largest losses across their derivatives and

securities financing activities, including securities

lending and repurchase or reverse repurchase agree-

ment activities. The counterparty default scenario

component is an add-on to the macroeconomic con-

ditions and financial market environment specified

in the Federal Reserve’s adverse and severely adverse

stress scenarios.

Each BHC’s largest counterparty will be determined

by net stressed losses; estimated by applying the

global market shock to revalue non-cash securities

financing activity assets (securities or collateral)

posted or received; and for derivatives, to the value

of the trade position and non-cash collateral

exchanged. The as-of date for the counterparty

default scenario component is December 4, 2017—

the same date as the global market shock.

Market Risk Components for

Supervisory Adverse and Severely

Adverse Scenarios for IHCs

Beginning in CCAR 2019, an additional six firms

with significant trading activity will be subject to the

global market shock component in their adverse and

The eight LISCC BHCs subject to the counterparty default

component are as follows: Bank of America Corporation; The

Bank of New York Mellon Corp.; Citigroup Inc.; The Gold-

man Sachs Group, Inc.; JPMorgan Chase & Co.; Morgan Stan-

ley; State Street Corp.; and Wells Fargo & Company. See

12 CFR 252.54(b)(2)(ii).

In selecting its largest counterparty, a BHC subject to the coun-

terparty default component will not consider certain sovereign

entities (Canada, France, Germany, Italy, Japan, the United

Kingdom, and the United States) or designated central clearing

counterparties.

As with the global market shock, a BHC subject to the counter-

party default component may use data as of the date that corre-

sponds to its weekly internal risk reporting cycle as long as it

falls during the business week of the as-of date for the counter-

party default scenario component (i.e., December 4-8, 2017).

Losses from the global market shock will be assumed to occur

in the first quarter of the planning horizon.

February 2018 7

severely adverse scenarios.

For 2018, these firms

will be subject to interim market risk components in

the supervisory adverse and severely adverse sce-

narios used in the annual company-run stress test

(company-run market risk component) and the

supervisory stress test (supervisory market risk com-

ponent) to assess the potential losses and capital

impact in connection with each firm’s trading and

counterparty activity.

For the company-run stress test, each firm must

reflect trading and counterparty losses in the adverse

and severely adverse scenarios using a company-run

market risk component described in the individual

notices to these firms that is tailored to the firms’

risks.

For the supervisory stress test, the Federal Reserve

will apply a supervisory market risk component,

which is a simplified version of the global market

shock and large counterparty default scenario com-

ponent. As described in the letters to the IHCs, the

Federal Reserve will apply specific loss rates to cer-

tain exposures, based on the losses used in the global

market shock and large counterparty default compo-

nents in 2014-2017. Specifically, the following loss

rates will be applied to the applicable measure of

exposures as of December 31, 2017:

•

Securitized products losses: 22.1% loss rate in the

adverse scenario and 46.4% loss rate in the severely

adverse scenario to certain loans and credits held

for trading.

•

Trading mark-to-market and trading incremental

default risk losses: 1.4% loss rate in the adverse sce-

nario and 1.8% loss rate in the severely adverse sce-

nario to market risk-weighted assets.

•

Credit valuation adjustments: 1.3% loss rate in the

adverse scenario and 2.8% loss rate in the severely

adverse scenario to over-the-counter derivatives

risk-weighted assets.

•

Large counterparty default losses: 1.0% loss rate in

the adverse scenario and 1.5% loss rate in the

severely adverse scenario to repo-style transactions

and over-the-counter derivatives risk-weighted

assets.

Losses on the supervisory market risk component

will be treated as an add-on to any losses associated

with the macroeconomic scenarios and will be

assumed to occur in the first quarter of the planning

horizon. The Board will apply the same methodol-

ogy to all U.S. IHCs subject to the supervisory mar-

ket risk component in 2018.

The six firms that will be subject to the global market shock

component are: Barclays US LLC; Credit Suisse Holdings

(USA), Inc.; DB USA Corporation; HSBC North America

Holdings Inc.; RBC USA Holdco Corporation; and UBS

Americas Holdings LLC. See 12 CFR 252.54(b)(2)(ii).

See 12 CFR 252.44(b); 12 CFR 252.54(b)(2)(ii).

Securitized products exposure will equal the sum of FR Y-

9C HC-D Column A, lines 4.c.; 4.e.; 5.a.(1); 5.a.(2); 5.a.(3); 6.a;

6.c.(1); 6.c.(2);6.c.(3); and 6.c.(4).

Trading mark-to-market and trading incremental default risk

exposures will equal FR Y-9C HC-R.II line 27.

Credit valuation adjustment exposure will equal the risk-

weighted amounts of FR Y-9C HC-R.II line 20.

Large counterparty default exposure will equal the risk-

weighted amounts of FR Y-9C HC-R.II lines 16 and 20.

8 Federal Reserve Supervisory Scenarios

Variables for the Supervisory Scenarios

Table 1.A. Historical data: Domestic variables, Q1:2000–Q4:2017

Percent, unless otherwise indicated.

Date

Real GDP

growth

Nominal

GDP

growth

Real

dispo-

sable

income

growth

Nominal

dispo-

sable

income

growth

Unem-

ployment

rate

CPI

inflation

rate

3-month

Treasury

rate

5-year

Treasury

yield

10-year

Treasury

yield

BBB

corporate

yield

Mortgage

rate

Prime

rate

Level

Dow

Jones

Total

Stock

Market

Index

House

Price

Index

Com-

mercial

Real

Estate

Price

Index

Market

Volatility

Index

Q1 2000 1.2 4.3 8.1 11.8 4.0 4.0 5.5 6.6 6.7 8.2 8.3 8.7 14,296 102 127 27.0

Q2 2000 7.8 10.2 4.2 6.1 3.9 3.2 5.7 6.5 6.4 8.5 8.3 9.2 13,619 105 125 33.5

Q3 2000 0.5 3.1 4.8 7.4 4.0 3.7 6.0 6.1 6.1 8.1 8.0 9.5 13,613 107 139 21.9

Q4 2000 2.3 4.5 1.4 3.6 3.9 2.9 6.0 5.6 5.8 7.9 7.6 9.5 12,176 110 144 31.7

Q1 2001 -1.1 1.4 3.5 6.3 4.2 3.9 4.8 4.9 5.3 7.4 7.0 8.6 10,646 112 143 32.8

Q2 2001 2.1 5.1 -0.3 1.6 4.4 2.8 3.7 4.9 5.5 7.5 7.1 7.3 11,407 114 142 34.7

Q3 2001 -1.3 0.0 9.8 10.1 4.8 1.1 3.2 4.6 5.3 7.3 7.0 6.6 9,563 116 143 43.7

Q4 2001 1.1 2.3 -4.9 -4.6 5.5 -0.3 1.9 4.2 5.1 7.2 6.8 5.2 10,708 118 139 35.3

Q1 2002 3.7 5.1 10.1 10.9 5.7 1.3 1.7 4.5 5.4 7.6 7.0 4.8 10,776 120 140 26.1

Q2 2002 2.2 3.8 2.0 5.2 5.8 3.2 1.7 4.5 5.4 7.6 6.8 4.8 9,384 123 140 28.4

Q3 2002 2.0 3.8 -0.5 1.5 5.7 2.2 1.6 3.4 4.5 7.3 6.3 4.8 7,774 127 142 45.1

Q4 2002 0.3 2.4 1.9 3.8 5.9 2.4 1.3 3.1 4.3 7.0 6.1 4.5 8,343 129 144 42.6

Q1 2003 2.1 4.6 1.1 4.0 5.9 4.2 1.2 2.9 4.2 6.5 5.8 4.3 8,052 132 151 34.7

Q2 2003 3.8 5.1 5.9 6.3 6.1 -0.7 1.0 2.6 3.8 5.7 5.5 4.2 9,342 135 151 29.1

Q3 2003 6.9 9.3 6.7 9.3 6.1 3.0 0.9 3.1 4.4 6.0 6.0 4.0 9,650 139 149 22.7

Q4 2003 4.8 6.8 1.6 3.3 5.8 1.5 0.9 3.2 4.4 5.8 5.9 4.0 10,800 143 147 21.1

Q1 2004 2.3 5.9 2.9 6.1 5.7 3.4 0.9 3.0 4.1 5.5 5.6 4.0 11,039 148 153 21.6

Q2 2004 3.0 6.6 4.0 7.0 5.6 3.2 1.1 3.7 4.7 6.1 6.1 4.0 11,145 154 164 20.0

Q3 2004 3.7 6.3 2.1 4.5 5.4 2.6 1.5 3.5 4.4 5.8 5.9 4.4 10,894 159 175 19.3

Q4 2004 3.5 6.4 5.1 8.5 5.4 4.4 2.0 3.5 4.3 5.4 5.7 4.9 11,951 165 178 16.6

Q1 2005 4.3 8.3 -3.8 -1.8 5.3 2.0 2.5 3.9 4.4 5.4 5.8 5.4 11,637 172 179 14.7

Q2 2005 2.1 5.1 3.2 6.0 5.1 2.7 2.9 3.9 4.2 5.5 5.7 5.9 11,857 179 185 17.7

Q3 2005 3.4 7.3 2.1 6.6 5.0 6.2 3.4 4.0 4.3 5.5 5.8 6.4 12,283 185 190 14.2

Q4 2005 2.3 5.4 3.4 6.6 5.0 3.8 3.8 4.4 4.6 5.9 6.2 7.0 12,497 191 199 16.5

Q1 2006 4.9 8.2 9.5 11.5 4.7 2.1 4.4 4.6 4.7 6.0 6.2 7.4 13,122 194 204 14.6

Q2 2006 1.2 4.5 0.6 3.7 4.6 3.7 4.7 5.0 5.2 6.5 6.6 7.9 12,809 193 213 23.8

Q3 2006 0.4 3.2 1.2 4.1 4.6 3.8 4.9 4.8 5.0 6.4 6.6 8.3 13,322 192 220 18.6

Q4 2006 3.2 4.6 5.3 4.6 4.4 -1.6 4.9 4.6 4.7 6.1 6.2 8.3 14,216 191 222 12.7

Q1 2007 0.2 4.8 2.6 6.5 4.5 4.0 5.0 4.6 4.8 6.1 6.2 8.3 14,354 189 230 19.6

Q2 2007 3.1 5.4 0.8 4.0 4.5 4.6 4.7 4.7 4.9 6.3 6.4 8.3 15,163 184 239 18.9

Q3 2007 2.7 4.2 1.1 3.4 4.7 2.6 4.3 4.5 4.8 6.5 6.6 8.2 15,318 178 247 30.8

Q4 2007 1.4 3.2 0.3 4.4 4.8 5.0 3.4 3.8 4.4 6.4 6.2 7.5 14,754 172 249 31.1

Q1 2008 -2.7 -0.5 2.9 6.5 5.0 4.4 2.1 2.8 3.9 6.5 5.9 6.2 13,284 165 236 32.2

Q2 2008 2.0 4.0 8.7 13.3 5.3 5.3 1.6 3.2 4.1 6.8 6.1 5.1 13,016 157 224 24.1

Q3 2008 -1.9 0.8 -8.9 -5.1 6.0 6.3 1.5 3.1 4.1 7.2 6.3 5.0 11,826 150 231 46.7

Q4 2008 -8.2 -7.7 2.6 -3.2 6.9 -8.9 0.3 2.2 3.7 9.4 5.9 4.1 9,057 142 219 80.9

Q1 2009 -5.4 -4.5 -0.8 -3.0 8.3 -2.7 0.2 1.9 3.2 9.0 5.1 3.3 8,044 138 208 56.7

Q2 2009 -0.5 -1.2 2.9 4.7 9.3 2.1 0.2 2.3 3.7 8.2 5.0 3.3 9,343 138 180 42.3

(continued)

Table 1.A.—continued

Date

Real GDP

growth

Nominal

GDP

growth

Real

dispo-

sable

income

growth

Nominal

dispo-

sable

income

growth

Unem-

ployment

rate

CPI

inflation

rate

3-month

Treasury

rate

5-year

Treasury

yield

10-year

Treasury

yield

BBB

corporate

yield

Mortgage

rate

Prime

rate

Level

Dow

Jones

Total

Stock

Market

Index

House

Price

Index

Com-

mercial

Real

Estate

Price

Index

Market

Volatility

Index

Q3 2009 1.3 1.2 -4.3 -1.9 9.6 3.5 0.2 2.5 3.8 6.8 5.2 3.3 10,813 138 160 31.3

Q4 2009 3.9 5.2 -0.5 2.2 9.9 3.2 0.1 2.3 3.7 6.1 4.9 3.3 11,385 139 160 30.7

Q1 2010 1.7 3.2 0.4 1.8 9.8 0.6 0.1 2.4 3.9 5.8 5.0 3.3 12,032 139 152 27.3

Q2 2010 3.9 5.8 5.3 5.8 9.6 -0.1 0.1 2.3 3.6 5.6 4.9 3.3 10,646 138 165 45.8

Q3 2010 2.7 4.6 2.0 3.2 9.5 1.2 0.2 1.6 2.9 5.1 4.4 3.3 11,814 135 165 32.9

Q4 2010 2.5 4.7 2.8 5.0 9.5 3.3 0.1 1.5 3.0 5.0 4.4 3.3 13,131 134 167 23.5

Q1 2011 -1.5 0.2 5.0 8.2 9.0 4.3 0.1 2.1 3.5 5.4 4.8 3.3 13,909 133 172 29.4

Q2 2011 2.9 6.0 -0.6 3.5 9.1 4.6 0.0 1.8 3.3 5.1 4.7 3.3 13,843 132 173 22.7

Q3 2011 0.8 3.3 2.1 4.3 9.0 2.6 0.0 1.1 2.5 4.9 4.3 3.3 11,677 133 172 48.0

Q4 2011 4.6 5.2 0.2 1.6 8.6 1.8 0.0 1.0 2.1 5.0 4.0 3.3 13,019 133 178 45.5

Q1 2012 2.7 4.9 6.7 9.2 8.3 2.3 0.1 0.9 2.1 4.7 3.9 3.3 14,627 134 180 23.0

Q2 2012 1.9 3.8 3.1 4.4 8.2 0.8 0.1 0.8 1.8 4.5 3.8 3.3 14,100 138 181 26.7

Q3 2012 0.5 2.7 -0.2 1.1 8.0 1.8 0.1 0.7 1.6 4.2 3.6 3.3 14,895 140 187 20.5

Q4 2012 0.1 1.7 10.9 13.3 7.8 2.7 0.1 0.7 1.7 3.9 3.4 3.3 14,835 143 187 22.7

Q1 2013 2.8 4.4 -15.7 -14.5 7.7 1.6 0.1 0.8 1.9 4.0 3.5 3.3 16,396 147 190 19.0

Q2 2013 0.8 1.6 2.4 2.5 7.5 -0.5 0.1 0.9 2.0 4.1 3.7 3.3 16,771 151 199 20.5

Q3 2013 3.1 5.1 2.4 3.9 7.2 2.2 0.0 1.5 2.7 4.9 4.4 3.3 17,718 155 208 17.0

Q4 2013 4.0 6.1 0.9 2.6 6.9 1.6 0.1 1.4 2.8 4.8 4.3 3.3 19,413 158 212 20.3

Q1 2014 -0.9 0.7 4.3 6.5 6.7 2.6 0.0 1.6 2.8 4.6 4.4 3.3 19,711 160 211 21.4

Q2 2014 4.6 7.0 5.3 7.1 6.2 1.9 0.0 1.7 2.7 4.3 4.2 3.3 20,569 161 220 17.0

Q3 2014 5.2 7.1 4.2 5.5 6.1 1.0 0.0 1.7 2.5 4.2 4.1 3.3 20,459 163 223 17.0

Q4 2014 2.0 2.6 5.9 5.7 5.7 -0.7 0.0 1.6 2.3 4.2 4.0 3.3 21,425 166 234 26.3

Q1 2015 3.2 3.2 4.3 2.6 5.6 -2.5 0.0 1.5 2.0 4.0 3.7 3.3 21,708 168 249 22.4

Q2 2015 2.7 5.0 3.8 5.6 5.4 2.4 0.0 1.5 2.2 4.2 3.8 3.3 21,631 170 251 18.9

Q3 2015 1.6 3.0 1.8 3.2 5.1 1.5 0.0 1.6 2.3 4.5 4.0 3.3 19,959 172 257 40.7

Q4 2015 0.5 1.3 2.9 3.1 5.0 0.4 0.1 1.6 2.2 4.6 3.9 3.3 21,101 175 254 24.4

Q1 2016 0.6 0.8 0.2 0.9 4.9 0.1 0.3 1.4 2.0 4.6 3.7 3.5 21,179 177 245 28.1

Q2 2016 2.2 4.7 1.9 4.0 4.9 2.3 0.3 1.3 1.8 4.1 3.6 3.5 21,621 179 248 25.8

Q3 2016 2.8 4.2 0.7 2.5 4.9 1.8 0.3 1.2 1.6 3.7 3.4 3.5 22,469 182 266 18.1

Q4 2016 1.8 3.8 -1.8 0.1 4.7 3.0 0.4 1.7 2.2 4.1 3.8 3.5 23,277 184 269 22.5

Q1 2017 1.2 3.3 2.9 5.2 4.7 3.1 0.6 2.0 2.5 4.2 4.2 3.8 24,508 187 262 13.1

Q2 2017 3.1 4.1 2.7 3.0 4.3 -0.3 0.9 1.8 2.3 4.0 4.0 4.0 25,125 190 272 16.0

Q3 2017 3.2 5.3 0.5 2.1 4.3 2.0 1.0 1.8 2.3 3.9 3.9 4.3 26,149 193 275 16.0

Q4 2017 2.7 5.0 1.9 5.6 4.1 3.7 1.2 2.1 2.4 4.0 3.9 4.3 27,673 194 279 13.1

Note: Refer to

Notes Regarding Scenario Variables for more information on the definitions and sources of historical observations of the variables in the table.

10 Federal Reserve Supervisory Scenarios

Table 1.B. Historical data: International variables, Q1:2000–Q4:2017

Percent, unless otherwise indicated.

Date

Euro area

real GDP

growth

Euro area

inflation

Euro area

bilateral

dollar

exchange

rate

(USD/euro)

Developing

Asia

real GDP

growth

Developing

Asia

inflation

Developing

Asia

bilateral

dollar

exchange

rate

(F/USD,

index)

Japan

real GDP

growth

Japan

inflation

Japan

bilateral

dollar

exchange

rate

(yen/USD)

U.K.

real GDP

growth

U.K.

inflation

U.K.

bilateral

dollar

exchange

rate

(USD/pound)

Q1 2000 4.6 2.6 0.957 7.0 1.5 100.0 8.0 -0.5 102.7 3.8 0.3 1.592

Q2 2000 3.6 0.9 0.955 7.1 -0.3 100.7 0.9 -1.1 106.1 2.9 0.5 1.513

Q3 2000 2.2 3.4 0.884 8.1 2.2 101.5 0.3 -0.3 107.9 1.2 1.0 1.479

Q4 2000 3.1 2.8 0.939 3.0 2.4 105.1 3.8 -1.1 114.4 0.8 1.9 1.496

Q1 2001 3.4 1.2 0.879 4.9 1.7 106.0 2.3 0.7 125.5 4.1 -0.1 1.419

Q2 2001 0.6 4.0 0.847 5.5 2.1 106.1 -1.9 -2.3 124.7 3.4 3.2 1.408

Q3 2001 0.3 1.4 0.910 4.7 1.3 106.4 -4.4 -0.5 119.2 2.6 1.0 1.469

Q4 2001 0.9 1.7 0.890 8.5 0.0 106.9 -1.0 -1.9 131.0 1.3 -0.1 1.454

Q1 2002 0.5 3.1 0.872 7.7 0.5 107.3 0.4 -1.1 132.7 1.9 2.0 1.425

Q2 2002 1.9 2.0 0.986 8.1 1.1 104.8 3.2 0.1 119.9 2.9 0.9 1.525

Q3 2002 1.6 1.6 0.988 7.2 1.5 105.5 1.6 -0.4 121.7 3.3 1.3 1.570

Q4 2002 0.6 2.3 1.049 6.5 0.7 104.5 1.1 -0.8 118.8 3.8 1.9 1.610

Q1 2003 -1.0 3.3 1.090 6.7 3.6 105.5 -0.5 0.0 118.1 2.5 1.7 1.579

Q2 2003 0.2 0.5 1.150 2.1 1.1 104.0 3.3 0.3 119.9 3.7 0.2 1.653

Q3 2003 2.1 2.1 1.165 14.3 0.1 102.6 1.6 -0.5 111.4 4.0 1.7 1.662

Q4 2003 3.1 2.3 1.260 13.0 5.5 103.4 4.5 -1.0 107.1 3.1 1.7 1.784

Q1 2004 2.3 2.2 1.229 5.6 4.0 101.4 3.1 0.8 104.2 2.1 1.4 1.840

Q2 2004 2.1 2.6 1.218 6.9 4.1 102.8 -0.1 -0.4 109.4 1.7 0.8 1.813

Q3 2004 1.2 2.0 1.242 8.2 4.1 102.7 2.1 -0.1 110.2 0.9 1.1 1.809

Q4 2004 1.5 2.4 1.354 6.4 0.8 98.9 -1.1 1.9 102.7 1.5 2.4 1.916

Q1 2005 0.7 1.4 1.297 10.6 2.9 98.6 1.9 -1.2 107.2 3.4 2.6 1.889

Q2 2005 2.7 2.2 1.210 8.6 1.5 98.9 3.2 -1.0 110.9 4.4 1.8 1.793

Q3 2005 3.0 3.1 1.206 9.3 2.4 98.6 3.9 -1.0 113.3 4.3 2.8 1.770

Q4 2005 2.4 2.4 1.184 11.7 1.6 98.1 0.8 0.1 117.9 6.0 1.4 1.719

Q1 2006 3.7 1.7 1.214 11.0 2.4 96.8 0.3 1.2 117.5 1.1 1.9 1.739

Q2 2006 4.3 2.5 1.278 7.0 3.2 96.7 1.4 0.4 114.5 0.8 3.0 1.849

Q3 2006 2.6 2.1 1.269 10.3 2.2 96.4 -0.7 0.4 118.0 0.3 3.3 1.872

Q4 2006 4.5 0.9 1.320 11.2 3.6 94.6 4.9 -0.5 119.0 1.5 2.6 1.959

Q1 2007 3.0 2.3 1.337 13.9 3.6 94.0 3.0 -0.7 117.6 3.7 2.5 1.969

Q2 2007 2.6 2.3 1.352 10.5 4.9 91.9 0.5 0.4 123.4 2.9 1.8 2.006

Q3 2007 2.0 2.1 1.422 8.7 7.6 90.6 -1.8 0.3 115.0 2.7 0.3 2.039

Q4 2007 2.1 4.8 1.460 12.8 5.9 89.4 2.0 2.2 111.7 3.3 4.0 1.984

Q1 2008 2.2 4.3 1.581 7.2 8.1 88.0 1.2 1.2 99.9 1.1 3.4 1.986

Q2 2008 -1.5 3.2 1.575 6.0 6.3 88.7 -2.0 1.8 106.2 -2.7 5.8 1.991

Q3 2008 -2.3 3.2 1.408 3.1 2.9 91.5 -5.0 3.4 105.9 -6.3 5.9 1.780

Q4 2008 -6.7 -1.4 1.392 0.3 -1.1 92.2 -8.8 -2.1 90.8 -8.4 0.4 1.462

Q1 2009 -11.2 -1.1 1.326 4.4 -1.4 94.2 -18.2 -3.6 99.2 -6.2 -0.2 1.430

Q2 2009 -1.1 0.0 1.402 15.1 2.3 92.2 8.7 -1.6 96.4 -0.9 2.3 1.645

Q3 2009 1.2 1.1 1.463 12.7 4.1 91.3 0.1 -1.4 89.5 0.6 3.6 1.600

Q4 2009 2.2 1.6 1.433 9.2 5.0 90.6 5.9 -1.5 93.1 1.1 2.8 1.617

Q1 2010 1.7 1.8 1.353 9.8 4.4 89.8 3.5 1.0 93.4 2.2 4.2 1.519

Q2 2010 3.8 2.0 1.229 9.7 3.4 91.0 5.1 -1.4 88.5 3.6 3.3 1.495

Q3 2010 1.8 1.6 1.360 8.8 4.2 88.4 7.5 -1.9 83.5 1.9 2.2 1.573

Q4 2010 2.4 2.6 1.327 9.2 7.5 87.4 -2.9 1.3 81.7 0.3 3.9 1.539

Q1 2011 3.4 3.7 1.418 9.8 6.2 86.4 -6.1 -0.1 82.8 2.4 7.0 1.605

Q2 2011 0.0 3.2 1.452 6.5 5.4 85.3 -1.9 -0.7 80.6 0.6 4.6 1.607

Q3 2011 0.0 1.3 1.345 5.4 5.3 87.3 10.1 0.3 77.0 1.5 3.5 1.562

Q4 2011 -1.4 3.5 1.297 6.7 3.0 87.3 -0.6 -0.6 77.0 0.8 3.4 1.554

Q1 2012 -0.6 2.8 1.333 7.4 3.2 86.2 4.6 2.2 82.4 2.6 2.3 1.599

Q2 2012 -1.4 2.3 1.267 5.9 3.9 88.0 -2.4 -1.4 79.8 -0.4 1.9 1.569

(continued)

February 2018 11

Table 1.B.—continued

Date

Euro area

real GDP

growth

Euro area

inflation

Euro area

bilateral

dollar

exchange

rate

(USD/euro)

Developing

Asia

real GDP

growth

Developing

Asia

inflation

Developing

Asia

bilateral

dollar

exchange

rate

(F/USD,

index)

Japan

real GDP

growth

Japan

inflation

Japan

bilateral

dollar

exchange

rate

(yen/USD)

U.K.

real GDP

growth

U.K.

inflation

U.K.

bilateral

dollar

exchange

rate

(USD/pound)

Q3 2012 -0.6 1.6 1.286 6.6 2.2 86.1 -1.5 -1.9 77.9 4.7 2.1 1.613

Q4 2012 -1.7 2.4 1.319 7.2 3.5 86.0 0.9 0.1 86.6 -0.6 4.2 1.626

Q1 2013 -1.3 1.2 1.282 6.5 4.3 86.2 4.5 0.7 94.2 2.6 3.0 1.519

Q2 2013 1.9 0.4 1.301 6.4 3.0 87.1 3.8 -0.1 99.2 2.2 1.5 1.521

Q3 2013 1.4 1.3 1.354 7.7 3.7 86.5 3.1 2.7 98.3 3.4 2.1 1.618

Q4 2013 1.0 0.3 1.378 6.7 4.0 85.8 0.0 2.6 105.3 2.1 1.7 1.657

Q1 2014 1.7 0.8 1.378 6.0 1.4 86.8 3.3 1.1 103.0 3.5 1.8 1.668

Q2 2014 0.5 0.0 1.369 7.4 2.6 86.6 -6.6 8.2 101.3 3.5 1.4 1.711

Q3 2014 1.7 0.3 1.263 6.7 2.3 86.9 -0.2 1.6 109.7 3.1 0.8 1.622

Q4 2014 2.0 -0.4 1.210 5.7 1.2 88.1 2.8 -0.5 119.9 3.1 -0.4 1.558

Q1 2015 3.0 -0.9 1.074 6.1 0.8 87.9 5.1 0.4 120.0 1.4 -1.3 1.485

Q2 2015 1.3 1.9 1.115 6.9 2.8 88.3 0.5 0.5 122.1 2.3 0.8 1.573

Q3 2015 1.7 -0.2 1.116 6.5 2.7 90.9 0.3 0.1 119.8 1.7 0.8 1.512

Q4 2015 1.9 -0.1 1.086 5.4 1.5 92.2 -0.9 -0.4 120.3 2.9 0.0 1.475

Q1 2016 2.0 -1.3 1.139 6.6 2.8 91.7 2.2 0.0 112.4 0.8 -0.1 1.438

Q2 2016 1.4 1.2 1.103 6.6 2.8 94.0 1.6 -1.1 102.8 1.9 0.7 1.324

Q3 2016 1.6 1.2 1.124 6.1 1.2 93.6 0.9 -0.5 101.2 2.2 2.2 1.302

Q4 2016 2.7 1.8 1.055 5.7 2.3 97.5 1.4 3.0 116.8 3.0 2.0 1.234

Q1 2017 2.5 2.8 1.070 6.7 0.6 95.2 1.5 -0.1 111.4 1.2 3.7 1.254

Q2 2017 2.9 0.2 1.141 6.0 2.0 94.5 2.9 -0.8 112.4 1.2 3.0 1.300

Q3 2017 2.9 1.0 1.181 6.6 2.4 93.5 2.5 0.4 112.6 1.6 2.4 1.340

Q4 2017 2.3 1.7 1.202 5.9 2.6 91.0 1.8 0.9 112.7 1.4 2.9 1.353

Note: Refer to

Notes Regarding Scenario Variables for more information on the definitions and sources of historical observations of the variables in the table.

12 Federal Reserve Supervisory Scenarios

Table 2.A. Supervisory baseline scenario: Domestic variables, Q1:2018–Q1:2021

Percent, unless otherwise indicated.

Date

Real GDP

growth

Nominal

GDP

growth

Real

dispo-

sable

income

growth

Nominal

dispo-

sable

income

growth

Unem-

ployment

rate

CPI

inflation

rate

3-month

Treasury

rate

5-year

Treasury

yield

10-year

Treasury

yield

BBB

corporate

yield

Mortgage

rate

Prime

rate

Level

Dow

Jones

Total

Stock

Market

Index

House

Price

Index

Com-

mercial

Real

Estate

Price

Index

Market

Volatility

Index

Q1 2018 2.5 4.6 4.0 6.1 4.0 2.1 1.4 2.2 2.6 4.1 4.1 4.6 28,019 196 282 15.3

Q2 2018 2.8 4.8 2.9 4.8 4.0 1.9 1.7 2.4 2.7 4.3 4.3 4.8 28,382 197 286 17.5

Q3 2018 2.6 4.7 2.9 4.9 3.9 2.1 1.9 2.5 2.8 4.4 4.4 5.0 28,747 198 289 18.7

Q4 2018 2.5 4.6 2.8 4.8 3.8 2.1 2.1 2.7 2.9 4.5 4.5 5.2 29,110 199 293 20.0

Q1 2019 2.3 4.5 2.9 5.0 3.8 2.2 2.2 2.8 3.1 4.6 4.7 5.3 29,472 201 297 20.9

Q2 2019 2.3 4.4 2.5 4.5 3.8 2.2 2.4 2.8 3.1 4.7 4.8 5.5 29,830 202 300 21.5

Q3 2019 2.1 4.3 2.4 4.4 3.8 2.2 2.5 2.9 3.2 4.8 4.9 5.6 30,187 203 304 22.1

Q4 2019 2.0 4.2 2.3 4.4 3.7 2.4 2.6 2.9 3.3 4.9 4.9 5.7 30,538 204 308 22.1

Q1 2020 2.1 4.2 2.2 4.3 3.8 2.3 2.7 3.0 3.5 5.1 5.1 5.7 30,892 206 310 23.5

Q2 2020 2.1 4.2 2.3 4.4 3.9 2.3 2.7 3.0 3.5 5.1 5.2 5.7 31,255 207 313 23.6

Q3 2020 2.1 4.2 2.3 4.4 4.0 2.3 2.7 3.1 3.5 5.2 5.2 5.7 31,623 209 315 23.8

Q4 2020 2.1 4.2 2.3 4.4 4.0 2.3 2.7 3.1 3.6 5.2 5.2 5.8 31,995 211 317 23.8

Q1 2021 2.1 4.2 2.3 4.4 4.1 2.3 2.7 3.1 3.6 5.2 5.3 5.8 32,371 212 320 23.9

Note: Refer to

Notes Regarding Scenario Variables for more information on the definitions and sources of historical observations of the variables in the table.

Table 2.B. Supervisory baseline scenario: International variables, Q1:2018–Q1:2021

Percent, unless otherwise indicated.

Date

Euro area

real GDP

growth

Euro area

inflation

Euro area

bilateral

dollar

exchange

rate

(USD/euro)

Developing

Asia

real GDP

growth

Developing

Asia

inflation

Developing

Asia

bilateral

dollar

exchange

rate

(F/USD,

index)

Japan

real GDP

growth

Japan

inflation

Japan

bilateral

dollar

exchange

rate

(yen/USD)

U.K.

real GDP

growth

U.K.

inflation

U.K.

bilateral

dollar

exchange

rate

(USD/pound)

Q1 2018 2.1 1.5 1.201 6.0 2.5 91.5 1.5 0.9 112.7 1.4 2.6 1.350

Q2 2018 2.1 1.5 1.199 6.0 2.5 92.0 1.4 1.0 112.8 1.4 2.5 1.347

Q3 2018 2.0 1.6 1.198 6.0 2.5 92.5 1.2 1.0 112.8 1.4 2.4 1.344

Q4 2018 2.0 1.6 1.197 5.9 2.6 93.0 1.1 1.1 112.8 1.4 2.3 1.341

Q1 2019 1.9 1.6 1.202 5.8 2.7 93.2 1.1 1.2 112.6 1.4 2.2 1.344

Q2 2019 1.9 1.6 1.208 5.8 2.8 93.5 1.0 1.2 112.3 1.4 2.1 1.347

Q3 2019 1.8 1.7 1.213 5.7 2.9 93.7 1.0 1.3 112.0 1.4 2.1 1.351

Q4 2019 1.8 1.7 1.219 5.8 2.8 94.0 0.9 1.4 111.8 1.4 2.0 1.354

Q1 2020 1.8 1.8 1.219 5.8 2.8 94.0 0.8 1.4 111.8 1.5 2.0 1.354

Q2 2020 1.7 1.8 1.219 5.9 2.7 94.0 0.8 1.5 111.8 1.5 1.9 1.354

Q3 2020 1.7 1.9 1.219 5.9 2.7 94.0 0.8 1.5 111.8 1.5 1.9 1.354

Q4 2020 1.7 1.9 1.219 5.8 2.7 94.0 0.8 1.6 111.8 1.5 1.9 1.354

Q1 2021 1.6 1.9 1.219 5.7 2.8 94.0 0.8 1.6 111.8 1.6 1.9 1.354

Note: Refer to

Notes Regarding Scenario Variables for more information on the definitions and sources of historical observations of the variables in the table.

February 2018 13

Table 3.A. Supervisory adverse scenario: Domestic variables, Q1:2018–Q1:2021

Percent, unless otherwise indicated.

Date

Real GDP

growth

Nominal

GDP

growth

Real

dispo-

sable

income

growth

Nominal

dispo-

sable

income

growth

Unem-

ployment

rate

CPI

inflation

rate

3-month

Treasury

rate

5-year

Treasury

yield

10-year

Treasury

yield

BBB

corporate

yield

Mortgage

rate

Prime

rate

Level

Dow

Jones

Total

Stock

Market

Index

House

Price

Index

Com-

mercial

Real

Estate

Price

Index

Market

Volatility

Index

Q1 2018 -1.3 1.2 2.4 4.2 4.5 1.7 0.6 0.0 0.7 3.8 3.2 3.8 24,589 191 272 28.0

Q2 2018 -3.5 -1.4 -1.2 0.2 5.3 1.3 0.1 0.1 0.8 4.2 3.4 3.3 22,884 185 262 33.1

Q3 2018 -2.4 -0.4 -1.8 -0.2 5.8 1.6 0.1 0.2 0.9 4.4 3.6 3.3 21,104 180 254 33.7

Q4 2018 -1.3 0.6 -1.1 0.6 6.3 1.7 0.1 0.3 1.0 4.6 3.7 3.3 20,858 177 247 32.8

Q1 2019 -0.7 1.3 -0.3 1.5 6.6 1.8 0.1 0.4 1.1 4.8 3.9 3.2 19,718 174 242 31.7

Q2 2019 0.4 2.3 -0.1 1.6 6.9 1.9 0.1 0.5 1.2 4.8 3.9 3.2 19,998 172 239 28.8

Q3 2019 1.0 2.9 0.5 2.2 7.0 1.9 0.1 0.6 1.3 4.7 3.9 3.2 20,580 171 237 25.7

Q4 2019 2.5 4.3 1.0 2.9 7.0 2.1 0.1 0.6 1.4 4.6 3.9 3.2 21,350 171 237 23.1

Q1 2020 2.8 4.5 2.3 4.2 6.9 2.1 0.1 0.7 1.6 4.6 4.0 3.2 22,145 171 237 21.3

Q2 2020 3.0 4.7 2.4 4.2 6.8 2.0 0.1 0.7 1.7 4.4 4.0 3.2 23,213 172 238 20.1

Q3 2020 3.2 4.8 2.6 4.4 6.6 2.0 0.1 0.8 1.8 4.3 4.0 3.2 24,259 172 239 19.3

Q4 2020 3.3 4.9 2.8 4.5 6.5 2.0 0.1 0.9 1.8 4.2 3.9 3.2 25,405 173 240 18.7

Q1 2021 3.3 4.8 2.9 4.6 6.3 1.9 0.1 0.9 1.9 4.0 3.9 3.2 26,625 174 242 18.3

Note: Refer to

Notes Regarding Scenario Variables for more information on the definitions and sources of historical observations of the variables in the table.

Table 3.B. Supervisory adverse scenario: International variables, Q1:2018–Q1:2021

Percent, unless otherwise indicated.

Date

Euro area

real GDP

growth

Euro area

inflation

Euro area

bilateral

dollar

exchange

rate

(USD/euro)

Developing

Asia

real GDP

growth

Developing

Asia

inflation

Developing

Asia

bilateral

dollar

exchange

rate

(F/USD,

index)

Japan

real GDP

growth

Japan

inflation

Japan

bilateral

dollar

exchange

rate

(yen/USD)

U.K.

real GDP

growth

U.K.

inflation

U.K.

bilateral

dollar

exchange

rate

(USD/pound)

Q1 2018 -2.6 0.8 1.133 2.1 1.3 97.0 -1.7 -1.3 110.7 -2.8 1.3 1.319

Q2 2018 -3.4 0.3 1.113 2.5 0.5 99.8 -4.0 -1.9 109.6 -3.9 0.6 1.304

Q3 2018 -2.6 -0.1 1.115 3.7 0.1 101.1 -4.9 -2.2 109.6 -3.4 0.3 1.296

Q4 2018 -1.9 -0.4 1.118 4.4 -0.1 102.1 -5.1 -2.4 109.1 -2.8 0.2 1.287

Q1 2019 -0.9 -0.6 1.146 5.4 0.1 101.4 -4.0 -1.9 108.6 -1.6 0.4 1.295

Q2 2019 -0.1 -0.2 1.155 5.9 0.3 100.8 -2.7 -1.5 108.1 -0.4 0.6 1.301

Q3 2019 0.7 0.1 1.163 6.1 0.6 100.2 -1.6 -1.1 107.7 0.5 0.8 1.307

Q4 2019 1.3 0.4 1.171 6.1 0.8 99.6 -0.8 -0.7 107.3 1.1 1.0 1.312

Q1 2020 1.7 0.7 1.174 6.2 0.9 98.9 -0.1 -0.3 107.3 1.7 1.1 1.313

Q2 2020 2.0 0.9 1.178 6.2 1.1 98.2 0.4 0.0 107.4 2.0 1.2 1.313

Q3 2020 2.1 1.1 1.181 6.3 1.3 97.7 0.8 0.3 107.5 2.2 1.3 1.314

Q4 2020 2.1 1.2 1.185 6.3 1.5 97.2 1.0 0.5 107.7 2.3 1.4 1.314

Q1 2021 2.0 1.3 1.188 6.3 1.7 96.9 1.2 0.7 107.8 2.3 1.5 1.315

Note: Refer to

Notes Regarding Scenario Variables for more information on the definitions and sources of historical observations of the variables in the table.

14 Federal Reserve Supervisory Scenarios

Table 4.A. Supervisory severely adverse scenario: Domestic variables, Q1:2018–Q1:2021

Percent, unless otherwise indicated.

Date

Real GDP

growth

Nominal

GDP

growth

Real

dispo-

sable

income

growth

Nominal

dispo-

sable

income

growth

Unem-

ployment

rate

CPI

inflation

rate

3-month

Treasury

rate

5-year

Treasury

yield

10-year

Treasury

yield

BBB

corporate

yield

Mortgage

rate

Prime

rate

Level

Dow

Jones

Total

Stock

Market

Index

House

Price

Index

Com-

mercial

Real

Estate

Price

Index

Market

Volatility

Index

Q1 2018 -4.7 -2.3 1.4 3.0 5.0 1.4 0.1 1.9 2.4 7.1 5.3 3.3 13,466 186 262 50.7

Q2 2018 -8.9 -7.1 -4.2 -3.1 6.5 0.9 0.1 1.9 2.4 7.7 5.7 3.3 11,631 171 234 62.4

Q3 2018 -6.8 -5.1 -5.1 -3.8 7.6 1.2 0.1 1.9 2.4 7.9 5.8 3.3 10,575 159 212 59.5

Q4 2018 -4.7 -3.0 -3.9 -2.5 8.5 1.3 0.1 1.9 2.4 8.0 5.9 3.3 10,306 151 195 52.8

Q1 2019 -3.6 -1.8 -2.9 -1.5 9.3 1.5 0.1 1.9 2.4 8.1 6.0 3.2 9,689 143 181 47.4

Q2 2019 -1.3 0.3 -2.4 -1.0 9.7 1.5 0.1 1.9 2.4 7.9 6.0 3.2 10,100 139 173 37.9

Q3 2019 -0.2 1.4 -1.4 -0.1 10.0 1.5 0.1 1.9 2.4 7.5 5.8 3.2 10,949 136 167 29.7

Q4 2019 2.8 4.3 -0.1 1.5 9.9 1.8 0.1 1.9 2.4 7.1 5.7 3.2 12,031 136 167 23.5

Q1 2020 3.5 4.8 1.9 3.4 9.7 1.8 0.1 1.9 2.4 6.7 5.5 3.2 13,234 136 167 19.8

Q2 2020 4.0 5.2 2.3 3.7 9.5 1.7 0.1 1.9 2.4 6.3 5.3 3.2 14,713 137 170 17.5

Q3 2020 4.2 5.3 2.7 4.1 9.2 1.6 0.1 1.9 2.4 5.9 5.1 3.2 16,323 139 172 16.0

Q4 2020 4.5 5.5 3.1 4.3 8.9 1.6 0.1 1.9 2.4 5.5 4.9 3.2 18,143 141 176 15.0

Q1 2021 4.5 5.4 3.3 4.5 8.6 1.5 0.1 1.9 2.4 5.0 4.7 3.2 20,168 143 180 14.4

Note: Refer to

Notes Regarding Scenario Variables for more information on the definitions and sources of historical observations of the variables in the table.

Table 4.B. Supervisory severely adverse scenario: International variables, Q1:2018–Q1:2021

Percent, unless otherwise indicated.

Date

Euro area

real GDP

growth

Euro area

inflation

Euro area

bilateral

dollar

exchange

rate

(USD/euro)

Developing

Asia

real GDP

growth

Developing

Asia

inflation

Developing

Asia

bilateral

dollar

exchange

rate

(F/USD,

index)

Japan

real GDP

growth

Japan

inflation

Japan

bilateral

dollar

exchange

rate

(yen/USD)

U.K.

real GDP

growth

U.K.

inflation

U.K.

bilateral

dollar

exchange

rate

(USD/pound)

Q1 2018 -4.0 0.1 1.123 -1.5 0.3 99.5 -3.8 -2.6 108.6 -3.5 0.6 1.316

Q2 2018 -5.2 -0.7 1.097 -0.8 -1.0 103.5 -7.4 -3.7 106.4 -5.1 -0.2 1.296

Q3 2018 -4.3 -1.1 1.084 1.5 -1.7 105.9 -9.9 -5.0 103.4 -4.8 -0.7 1.284

Q4 2018 -3.3 -1.2 1.071 2.9 -2.2 107.5 -11.4 -5.8 100.9 -4.1 -0.9 1.271

Q1 2019 -1.6 -0.8 1.081 4.9 -2.1 106.3 -9.8 -5.2 100.5 -2.8 -0.6 1.278

Q2 2019 -0.1 -0.5 1.091 5.9 -1.8 105.0 -7.3 -4.5 100.0 -1.4 -0.3 1.284

Q3 2019 1.0 -0.1 1.101 6.2 -1.4 103.7 -5.0 -3.7 99.6 -0.2 0.1 1.290

Q4 2019 1.7 0.3 1.111 6.2 -1.0 102.5 -3.2 -3.0 99.3 0.8 0.4 1.295

Q1 2020 2.1 0.6 1.116 6.3 -0.6 101.1 -1.7 -2.3 99.3 1.5 0.7 1.295

Q2 2020 2.4 0.8 1.121 6.4 -0.3 100.0 -0.5 -1.7 99.4 2.1 1.0 1.294

Q3 2020 2.4 1.0 1.127 6.5 0.0 98.9 0.3 -1.2 99.6 2.4 1.2 1.294

Q4 2020 2.4 1.1 1.132 6.5 0.4 98.1 0.9 -0.7 99.9 2.6 1.3 1.293

Q1 2021 2.3 1.2 1.136 6.6 0.8 97.4 1.3 -0.3 100.1 2.6 1.4 1.293

Note: Refer to

Notes Regarding Scenario Variables for more information on the definitions and sources of historical observations of the variables in the table.

February 2018 15

Notes Regarding Scenario Variables

Sources for data through 2017:Q4 (as released

through January 18, 2018). The 2017:Q4 values of

variables marked with an asterisk (*) are projected.

*U.S. real GDP growth: Percent change in real gross

domestic product, chained (2009) dollars, expressed

at an annualized rate, Bureau of Economic Analysis

(NIPA table 1.1.6, line 1).

*U.S. nominal GDP growth: Percent change in gross

domestic product (current dollars), expressed at an

annualized rate, Bureau of Economic Analysis

(NIPA table 1.1.5, line 1).

*U.S. real disposable income growth: Percent change

in disposable personal income (current dollars)

divided by the price index for personal consumption

expenditures, expressed at an annualized rate, Bureau

of Economic Analysis (NIPA table 2.1, line 27, and

NIPA table 1.1.4, line 2).

*U.S. nominal disposable income growth: Percent

change in disposable personal income (current dol-

lars), expressed at an annualized rate, Bureau of

Economic Analysis (NIPA table 2.1, line 27).

U.S. unemployment rate: Quarterly average of

seasonally-adjusted monthly data for the unemploy-

ment rate of the civilian, noninstitutional population

of age 16 years and older, Bureau of Labor Statistics

(series LNS14000000).

U.S. CPI inflation: Percent change in the quarterly

average of seasonally-adjusted monthly data for the

consumer price index, expressed at an annualized

rate, Bureau of Labor Statistics (series

CUSR0000SA0).

U.S. 3-month Treasury rate: Quarterly average of

3-month Treasury bill secondary market rate on a

discount basis, H.15 Release, Selected Interest Rates,

Federal Reserve Board (series RIFSGFSM03_N.B).

U.S. 5-year Treasury yield: Quarterly average of the

yield on 5-year U.S. Treasury bonds, constructed for

the FRB/U.S. model by Federal Reserve staff based

on the Svensson smoothed term structure model; see

Lars E. O. Svensson (1995), “Estimating Forward

Interest Rates with the Extended Nelson-Siegel

Method,” Quarterly Review, no. 3, Sveriges Riks-

bank, pp. 13–26.

U.S. 10-year Treasury yield: Quarterly average of the

yield on 10-year U.S. Treasury bonds, constructed

for the FRB/U.S. model by Federal Reserve staff

based on the Svensson smoothed term structure

model; see id.

U.S. BBB corporate yield: Merrill Lynch 10-year

BBB corporate bond yield, Z.1 Release (Financial

Accounts of the United States), Federal Reserve

Board (series

FL073163013.Q).

U.S. mortgage rate: Quarterly average of weekly

series for the interest rate of a conventional, con-

forming, 30-year fixed-rate mortgage, obtained from

the Primary Mortgage Market Survey of the Federal

Home Loan Mortgage Corporation.

U.S. prime rate: Quarterly average of monthly series,

H.15 Release (Selected Interest Rates), Federal

Reserve Board (series RIFSPBLP_N.M).

U.S. Dow Jones Total Stock Market (Float Cap)

Index: End of quarter value via Bloomberg

Finance L.P.

*U.S. House Price Index: Price Index for Owner-

Occupied Real Estate, CoreLogic National, Z.1

Release (Financial Accounts of the United States),

Federal Reserve Board (series FL075035243.Q).

*U.S. Commercial Real Estate Price Index: Commer-

cial Real Estate Price Index, Z.1 Release (Financial

Accounts of the United States), Federal Reserve

Board (series FL075035503.Q divided by 1000).

U.S. Market Volatility Index (VIX): VIX converted

to quarterly frequency using the maximum close-of-

day value in any quarter, Chicago Board Options

Exchange via Bloomberg Finance LP.

*Euro area real GDP growth: Percent change in real

gross domestic product at an annualized rate, staff

calculations based on Statistical Office of the Euro-

pean Communities via Haver, extended back using

ECB Area Wide Model dataset (ECB Working Paper

series no. 42).

Euro area inflation: Percent change in the quarterly

average of the harmonized index of consumer prices

at an annualized rate, staff calculations based on Sta-

tistical Office of the European Communities via

Haver.

16 Federal Reserve Supervisory Scenarios

*Developing Asia real GDP growth: Percent change

in real gross domestic product at an annualized rate,

staff calculations based on data from Bank of Korea

via Haver; National Bureau of Statistics of China via

Haver; Indian Central Statistics Office via Haver;

Census and Statistics Department of Hong Kong via

Haver; and Taiwan Directorate-General of Budget,

Accounting and Statistics via Haver.

*Developing Asia inflation: Percent change in the

quarterly average of the consumer price index, or

local equivalent, at an annualized rate, staff calcula-

tions based on data from National Bureau of Statis-

tics of China via Haver; Indian Ministry of Statistics

and Programme Implementation via Haver; Labour

Bureau of India via Haver; National Statistical

Office of the Republic of Korea via Haver; Census

and Statistics Department of Hong Kong via Haver;

and Taiwan Directorate-General of Budget,

Accounting and Statistics via Haver.

*Japan real GDP growth: Percent change in gross

domestic product at an annualized rate from 1980 to

present and percent change in gross domestic expen-

diture at an annualized rate prior to 1980, Cabinet

Office of Japan via Haver.

*Japan inflation: Percent change in the quarterly

average of the consumer price index at an annualized

rate, based on data from the Ministry of Internal

Affairs and Communications via Haver.

*U.K. real GDP growth: Percent change in gross

domestic product at an annualized rate, U.K. Office

for National Statistics via Haver.

U.K. inflation: Percent change in the quarterly aver-

age of the consumer price index at an annualized

rate from 1988 to present and percent change in the

quarterly average of the retail prices index prior to

1988, staff calculations based on data from the U.K.

Office for National Statistics via Haver.

Exchange rates: End-of-quarter exchange rates, H.10

Release (Foreign Exchange Rates), Federal Reserve

Board.

February 2018 17

0218