HOW DID THE FOMC VIEW THE GREAT RECESSION AS IT WAS HAPPENING?: EVALUATING THE MINUTES FROM FOMC MEETINGS, 2006-2010

In setting monetary policy, the Federal Open Market Committee uses forecasts and other information to assess the current and future states of the US economy. Numerous studies have evaluated the Greenbook forecasts but did not determine why a forecast was made, what factors were considered or the uncertainty that was involved. The minutes of the FOMC provide such information. While the minutes are qualitative, using a quantitative index, we show that the FOMC saw the possibility of a recession but did not predict it. Using textual analysis, we determined which variables informed the forecasts.