February 1999 Monetary Policy Report

The report now describes improved inflation prospects, stronger GDP growth projections, and stable unemployment, while highlighting a sharp deterioration in net exports and a widening trade deficit. It also notes eased financial market volatility, elevated credit card delinquencies, and a unified budget surplus, with new coverage of Russia's crisis and yen depreciation.

Inflation

• The report now says inflation is not expected to pick up in the near term, whereas the previous report emphasized greater risk of a pickup due to transitory factors. Read the section
  Quotes

  Previous report: “the outlook for inflation has taken on a greater degree of risk. Consumer prices actually rose a bit less rapidly in the first half of 1998 than they did in 1997, but transitory factors--the drop in oil prices, the runup in the dollar, and weak economic activity in Asia--exerted considerable downward pressure on domestic prices. These factors will not persist indefinitely.”

  This report: “inflation remained subdued, and a pickup was not expected in the near-to-intermediate term because of declining oil prices, and because of economic weakness abroad and the appreciation of the dollar.”

Labor market

• The report now expects the unemployment rate to remain near 4.25 to 4.5 percent, whereas the previous report expected it to edge higher in 1999. Read the section
  Quotes

  Previous report: “The civilian unemployment rate, which averaged a bit less than 4-1/2 percent in the second quarter of 1998, is expected to stay near this level through the end of this year and to edge higher in 1999.”

  This report: “The anticipated expansion is expected to create enough new jobs to keep the civilian unemployment rate near its recent average, in a range of 4-1/4 percent to 4-1/2 percent.”

• The report now says nominal hourly compensation picked up only slightly despite tight labor markets, whereas the previous report described a more discernible uptilt in compensation trends. Read the section
  Quotes

  Previous report: “The further tightening of labor markets in recent quarters has been reflected in a more discernible uptilt to the trend in hourly compensation.”  ·  “the twelve-month change in the employment cost index (ECI) for private industry workers picked up to 3-1/2 percent in March, compared with 3 percent for the twelve months ending in March 1997”

  This report: “nominal hourly compensation of workers picked up only slightly despite the tightness of the labor market”

Financial conditions

• The report now notes that financial market volatility and illiquidity eased after the October policy move, whereas the previous report described conditions as supportive. Read the section
  Quotes

  Previous report: “Financial conditions in the second quarter and into July remained supportive of domestic spending”

  This report: “Following the October policy move, strains in domestic financial markets diminished considerably. As safe-haven demands for Treasury securities ebbed, Treasury yields generally trended higher, and measures of financial market volatility and illiquidity eased.”

• The report now highlights the first unified budget surplus in nearly three decades, whereas the previous report only mentioned debt reduction and cash balance augmentation. Read the section
  Quotes

  Previous report: “The surplus during the first half of calendar year 1998--boosted by the huge inflow of individual income tax receipts--enabled the Treasury to reduce its outstanding debt $57 billion while augmenting its cash balance $40 billion.”

  This report: “The federal government recorded a surplus in the unified budget this past fiscal year for the first time in nearly three decades.”  ·  “The surplus, amounting to $69 billion, was equal to about 3/4 percent of GDP, a huge turnabout from the deficits of the early 1990s, which in some years were more than 4-1/2 per cent of GDP.”

Financial stability

• The report now notes that credit card delinquency rates remained elevated, whereas the previous report said household financial stress had stabilized after years of deterioration. Read the section
  Quotes

  Previous report: “financial stress among households appears to have stabilized after several years of deterioration.”

  This report: “The delinquency rate on credit card loans at banks fluctuated in a fairly narrow range in 1997 and 1998, but it remained elevated after having posted a substantial rise over the previous two years.”

International

• The report now highlights a sharp deterioration in net exports and a widening trade deficit, whereas the previous report only noted a weakening trade balance. Read the section
  Quotes

  Previous report: “the substantial rise in the foreign exchange value of the dollar has boosted our real imports and--together with the slower growth in Asia--depressed our real exports.”

  This report: “Overall, real net exports deteriorated sharply, as exports stagnated and imports continued to surge.”

• The report now includes the Russian ruble's depreciation and the August devaluation, a topic absent from the previous report. Read the section
  Quotes

  This report: “the ruble depreciated more than 70 percent against the dollar”

• The report now describes the dollar as depreciating against the yen in 1998, whereas the previous report noted an appreciation since December. Read the section
  Quotes

  Previous report: “On balance, the dollar has appreciated about 7 percent in terms of the yen since the end of December.”

  This report: “On balance, the dollar depreciated almost 10 percent against the yen in 1998, reversing most of its net gain during 1997.”

Projections

• The report now projects real GDP growth of 2.5 to 3 percent for 1999, whereas the previous report projected 2 to 2-1/2 percent. Read the section
  Quotes

  Previous report: “For 1998 as a whole, the central tendency of their forecasts for real GDP growth spans a range of 3 percent to 3-1/4 percent. For 1999, these forecasts center on a range of 2 percent to 2-1/2 percent.”

  This report: “The central tendency of the FOMC participants' forecasts of real GDP growth from the fourth quarter of 1998 to the fourth quarter of 1999 is 2-1/2 percent to 3 percent.”

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