July 1999 Monetary Policy Report

The report now projects stronger growth and lower unemployment, while acknowledging higher inflation from rising oil and commodity prices. It also describes brighter global prospects, including recoveries in Japan, Brazil, and Korea, and notes a stronger dollar and larger current account deficit. Financial conditions show higher Treasury yields and a slump in depository institution credit.

Inflation

• The report now notes that oil prices rose sharply and other commodity prices trended up, raising overall inflation, instead of expecting no pickup in inflation. Read the section
  Quotes

  Previous 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.”

  This report: “oil prices rose sharply, other commodity prices trended up, and prices of non-oil imports fell less rapidly, raising overall inflation rates”

Financial conditions

• The report now describes a rise in Treasury yields this year due to ebbing financial strains and strong activity, whereas the previous report noted yields had fallen in late 1998. Read the section
  Quotes

  Previous report: “The resulting shift of demand toward safety and liquidity led to declines of 40 to 75 basis points in Treasury coupon yields between mid-August and mid-September.”

  This report: “Yields on Treasury securities have risen this year in response to the ebbing of the financial market strains of late 1998, surprisingly strong economic activity, concerns about the potential for increasing inflation, and the consequent anticipation of tighter monetary policy.”

• The report now says depository institution credit slumped in early 1999, whereas the previous report noted brisk expansion in 1998. Read the section
  Quotes

  Previous report: “posting a 5-3/4 percent rise in 1998, about half a percentage point less than in 1997.”

  This report: “Credit extended by depository institutions slumped over the first half of 1999, after having expanded quite briskly in 1998.”

International

• The report now describes global prospects as considerably brighter, whereas the previous report emphasized crisis conditions in Asia, Russia, and Brazil. Read the section
  Quotes

  Previous report: “output dropped at double-digit annual rates in the first half of the year”  ·  “ending the year down about 10 percent from its year-earlier level”

  This report: “Global economic prospects look considerably brighter than they did only a few months ago.”

• The report now reports a stronger dollar, appreciating 4-1/2 percent against major currencies, whereas the previous report noted a 10 percent depreciation against the yen. Read the section
  Quotes

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

  This report: “On balance the dollar has appreciated more than 4-1/2 percent against an index of the major currencies since the end of last year, owing mainly to its strengthening relative to the euro.”

• The report now reports a current account deficit of $274 billion at an annual rate in the first quarter of 1999, up from $220 billion in the first three quarters of 1998. Read the section
  Quotes

  Previous report: “For the first three quarters of the year, the current account deficit averaged $220 billion at an annual rate, substantially larger than the 1997 deficit of $155 billion.”

  This report: “The current account deficit reached $274 billion at an annual rate in the first quarter of 1999, a bit more than 3 percent of GDP, compared with $221 billion and 2-1/2 percent of GDP for 1998.”

• The report now reports Japan's first positive GDP growth in six quarters, whereas the previous report described a protracted postwar recession. Read the section
  Quotes

  Previous report: “Japanese economic activity contracted in 1998, as the country remained in its most protracted recession of the postwar era.”

  This report: “first-quarter GDP growth at an annual rate of 7.9 percent was recorded--the first positive growth in six quarters.”

• The report now highlights Brazil's rebound, including real appreciation, lower inflation, and a primary surplus above the IMF goal. Read the section
  Quotes

  This report: “By mid-May, the real had strengthened to 1.65 per dollar, even while the overnight rate had been cut, in steps, from its March high.”  ·  “Inflation has been lower than expected, with consumer price inflation at an annual rate of around 8 percent for the first half of the year.”  ·  “the government posted a primary surplus of more than 4 percent of GDP in the first quarter--well above the goal in the International Monetary Fund program.”

• The report now notes Korea's strongest recovery in emerging Asia, with all post-crisis production drop reversed. Read the section
  Quotes

  This report: “With the pace of the recovery accelerating this year, all of the post-crisis drop in production has been reversed.”

Projections

• The report now projects 1999 real GDP growth of 3-1/2 to 3-3/4 percent, up from the 2-1/2 to 3 percent range in February. Read the section
  Quotes

  Previous 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.”

  This report: “the central tendency of their forecasts of growth of real gross domestic product is 3-1/2 percent to 3-3/4 percent”

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