July 1997 Monetary Policy Report

The report now describes a slight policy tightening in late March, with the expected federal funds rate rising to around 5-1/2 percent, and a steady posture thereafter. It also notes further labor market tightness, disinflationary energy and food price trends, and introduces a sweep-adjusted M1 growth figure.

Inflation

• The report now highlights declines in energy prices and smaller increases in food prices as holding down inflation, a shift from the previous report's emphasis on food and energy price acceleration. Read the section
  Quotes

  Previous report: “acceleration of prices was confined largely to the food and energy sectors; prices for other consumer products decelerated, as did prices paid by businesses for capital goods and materials.”

  This report: “Price inflation has been subdued, held down in part by declines in energy prices, smaller increases in food prices, and lower prices for non-oil imports”

Labor market

• The report now describes labor markets as having tightened further in early 1997, whereas the previous report noted tightness in 1996 with a moderate pickup in wage increases. Read the section
  Quotes

  Previous report: “Tightness of the labor market led to a moderate pickup in wage increases in 1996.”

  This report: “The rapid increases in output led to a further tightening of labor markets in the first six months of 1997”

Financial conditions

• The report now provides a sweep-adjusted M1 growth rate of 4-3/4 percent for the first half of 1997, a measure not mentioned in the previous report. Read the section
  Quotes

  This report: “Adjusted for the estimated total of balances swept owing to the introduction of new sweep programs, M1 expanded at a 4-3/4 percent annual rate between the fourth quarter of 1996 and June 1997, a little below its sweep-adjusted growth rate in 1996.”

Monetary policy

• The report now states the FOMC tightened policy slightly in late March, raising the expected federal funds rate from around 5-1/4 percent to around 5-1/2 percent, a specific action not mentioned in the previous report. Read the section
  Quotes

  This report: “To protect against the possibility of such an outcome, the Committee tightened policy slightly.”  ·  “raising the expected federal funds rate from around 5-1/4 percent to around 5-1/2 percent”

• The report now indicates the FOMC maintained a steady posture after the spring softening, whereas the previous report described a bias toward restraint in all remaining directives of 1996. Read the section
  Quotes

  Previous report: “Labor markets continued to be taut over the balance of the year, and this bias toward restraint was included in directives adopted at all of the Committee's remaining meetings in 1996.”

  This report: “With the softening of demand in the spring, the Committee was able to maintain a steady posture in the money market while closely monitoring economic developments.”

These points are generated automatically by comparing the two reports' text, and each quote is checked against the report it's cited from.