February 1998 Monetary Policy Report

The report now describes stronger output and employment growth, with inflation slowing from already reduced rates. It highlights severe foreign financial difficulties, a larger dollar appreciation, and declining interest rates. Monetary ranges for 1998 are unchanged, while M2 and M3 growth exceeded their ranges.

Inflation

• The report now describes inflation as slowing from already reduced rates, whereas the previous report described it as subdued and held down by specific factors. Read the section
  Quotes

  Previous 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”

  This report: “Meanwhile, inflation slowed from the already reduced rates of the previous few years.”

Labor market

• The report now says wages and total hourly compensation accelerated in a tight labor market, whereas the previous report said labor costs accelerated a little. Read the section
  Quotes

  Previous report: “labor costs accelerated a little from the pace of a year earlier”

  This report: “Although wages and total hourly compensation accelerated in a tight labor market”

Economic activity

• The report now says output and employment growth remained brisk in early 1998, whereas the previous report expected more moderate expansion in the second half of 1997 and 1998. Read the section
  Quotes

  Previous report: “After growing swiftly on balance over the first half of the year, economic activity is expected to expand more moderately in the second half of 1997 and in 1998.”

  This report: “the available statistics suggest on balance that overall growth of output and employment has remained brisk in the early part of 1998”

Financial conditions

• The report now notes declining interest rates from April onward, whereas the previous report said most rates were little changed or declined a bit. Read the section
  Quotes

  Previous report: “most interest rates were little changed or declined a bit on net during the first half of the year”

  This report: “owing in part to supportive financial conditions, including a strong stock market, ample availability of credit, and, from April onward, declining intermediate- and long-term interest rates.”

• The report now says M2 growth last year was somewhat above the upper bound of its range, whereas the previous report noted slower second-quarter growth consistent with a slowing economy. Read the section
  Quotes

  Previous report: “Growth of M2 was much slower in the second quarter than in the first quarter (4-1/4 percent compared with 6 percent at an annual rate), consistent with the slowing of the economy and almost unchanged M2 opportunity cost.”

  This report: “it increased at a brisk 5-1/2 percent rate last year. As the Committee had anticipated, the aggregate was somewhat above the upper bound of its 1 percent to 5 percent annual range”

• The report now describes M3 growth last year as well above its annual range, whereas the previous report noted it was above the upper end of its growth cone. Read the section
  Quotes

  Previous report: “M3 rose about 7 percent at an annual rate between the fourth quarter of 1996 and June of this year. This pace is a little faster than last year's and again left M3 above the upper end of its growth cone, which, like the growth cone for M2, was set to be consistent with price stability.”

  This report: “M3 shot up last year, expanding 8-3/4 percent; this growth was well above the 2 percent to 6 percent annual range”

• The report now says ten-year and thirty-year Treasury yields fell about 70 basis points over 1997, whereas the previous report noted little change or slight declines through mid-July. Read the section
  Quotes

  Previous report: “Interest rates on Treasury securities were little changed or declined a bit, on balance, between the end of 1996 and mid-July.”

  This report: “between the end of 1996 and the end of 1997, the yields on ten-year and thirty-year Treasury bonds fell about 70 basis points.”

International

• The report now highlights severe financial difficulties in several foreign economies, particularly in Asia, after midyear, a development not mentioned in the previous report. Read the section
  Quotes

  This report: “the emergence after midyear of severe financial difficulties in several foreign economies, particularly among the advanced developing countries in Asia.”

• The report now emphasizes a larger dollar appreciation, noting a 16 percent rise since end-1996 and an 8 percent rise since October, whereas the previous report cited a 7 percent first-quarter rise. Read the section
  Quotes

  Previous report: “The trade-weighted value of the dollar in terms of the other G-10 currencies increased about 7 percent in the first quarter”

  This report: “the exchange value of the dollar, adjusted for relative consumer prices, has moved up about 8 percent since October and has increased about 16 percent from its level at the end of 1996”  ·  “this G-10 trade-weighted index of dollar exchange rates is up about 13 percent in nominal terms since the end of 1996”

Monetary policy

• The report now sets 1998 ranges for M2, M3, and debt unchanged from 1997, whereas the previous report had set provisional 1998 ranges at the same levels. Read the section
  Quotes

  Previous report: “At its meeting earlier this month, the Committee reaffirmed the ranges for 1997 growth of money and debt that it had established in February: 1 percent to 5 percent for M2, 2 percent to 6 percent for M3, and 3 percent to 7 percent for the debt of the domestic nonfinancial sectors.”  ·  “The Committee also set provisional ranges for 1998 at the same levels as for 1997.”

  This report: “the ranges for fourth-quarter to fourth-quarter growth are unchanged from those in 1997: 1 percent to 5 percent for M2, and 2 percent to 6 percent for M3.”  ·  “the Committee has left the range for debt unchanged for 1998.”

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