February 2000 Monetary Policy Report

The report now describes a tighter labor market and mounting inflation risks, while noting stronger foreign recoveries and a larger current account deficit. Financial conditions show higher junk bond default rates and monetary aggregates above the FOMC's ranges. The dollar's performance is now detailed as mixed against major currencies.

Inflation

• The report now emphasizes mounting risks of emerging inflation pressures, whereas the previous report described underlying inflation trends as subdued. Read the section
  Quotes

  Previous report: “underlying trends in inflation remaining subdued”

  This report: “Core inflation measures generally remained low, but with the labor market at its tightest in three decades and becoming tighter, the risk that pressures on costs and prices would eventually emerge mounted over the course of the year.”

Labor market

• The report now describes the labor market as the tightest in three decades and becoming tighter, whereas the previous report noted tightness near 1970 lows and slight further tightening. Read the section
  Quotes

  Previous report: “the unemployment rate hovering around lows last seen in 1970”  ·  “Labor markets tightened slightly further.”

  This report: “the labor market at its tightest in three decades and becoming tighter”

Economic activity

• The report now reports productivity growth of 3-1/4 percent over 1999, up from the 2-1/2 percent over the four quarters ended in the first quarter of 1999. Read the section
  Quotes

  Previous report: “the increase over the four quarters ended in the first quarter of 1999 was 2-1/2 percent.”

  This report: “output per hour in the nonfarm business sector rose 3-1/4 percent over the four quarters of the year”

Financial conditions

• The report now states M3 growth was 7-1/2 percent in 1999, above the FOMC's range, whereas the previous report had M3 at 6 percent, at the top of the range. Read the section
  Quotes

  Previous report: “M3 expanded at a 6 percent annual pace from the fourth quarter of 1998 through June of this year, placing this aggregate at the top of the 2 percent to 6 percent price-stability growth range set by the FOMC at its February meeting.”

  This report: “M3 rose 7-1/2 percent in 1999, somewhat outside the Committee's range of 2 percent to 6 percent”

• The report now says M2 grew 6-1/4 percent in 1999, above the FOMC's range, compared with the previous report's moderation and above-range position. Read the section
  Quotes

  Previous report: “M2 growth moderated over the first half of 1999, as the heightened demand for money waned; in June this aggregate was above its 1 percent to 5 percent price-stability growth range.”

  This report: “M2 increased 6-1/4 percent in 1999, somewhat above the FOMC's range of 1 percent to 5 percent.”

Financial stability

• The report now highlights that junk bond default rates rose to levels not seen since the 1990-91 recession, whereas the previous report noted they were at their highest in several years. Read the section
  Quotes

  Previous report: “The default rate on below-investment-grade bonds rose to its highest level in several years, an increase stemming in part from defaults by companies whose earnings were impaired by the drop in oil and other commodity prices last year.”

  This report: “default rates on junk bonds rose to levels not seen since the recession of 1990-91.”

International

• The report now says foreign economies recovered more quickly and with greater vigor than expected, whereas the previous report noted receding downturns and brighter outlooks. Read the section
  Quotes

  Previous report: “Two of the major threats faced by the economy in late 1998--economic downturns in many foreign nations and turmoil in financial markets around the world--receded over the first half of this year.”  ·  “the economic and financial outlook for many emerging-market countries was brighter.”

  This report: “foreign economies, in general, recovered more quickly and displayed greater vigor than had seemed likely at the start of the year”

• The report now states the current account deficit reached 3-1/2 percent of GDP in 1999, up from 2-1/2 percent in 1998, whereas the previous report cited 3 percent for the first quarter. Read the section
  Quotes

  Previous 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.”

  This report: “For the first three quarters of the year, the current account deficit increased more than one-third, reaching $320 billion at an annual rate, or 3-1/2 percent of GDP. In 1998, the current account deficit was 2-1/2 percent of GDP.”

• The report now says the dollar ended 1999 little changed overall, with a 10 percent depreciation against the yen and a 16 percent appreciation against the euro, replacing the earlier net appreciation of 4-1/2 percent. Read the section
  Quotes

  Previous 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.”

  This report: “The dollar's average foreign exchange value, measured on a trade-weighted basis against the currencies of a broad group of important U.S. trading partners, ended 1999 little changed from its level at the beginning of the year.”  ·  “The dollar depreciated 10 percent on balance against the yen over the course of 1999.”  ·  “On balance, the dollar appreciated 16 percent relative to the euro over 1999.”

• The report now emphasizes the initial 50 percent fall of the real and the risk of an inflation spiral, whereas the previous report highlighted the rebound and lower-than-expected inflation. Read the section
  Quotes

  Previous 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.”

  This report: “The real, allowed to float, soon fell nearly 50 percent against the dollar, generating fears of a depreciation-inflation spiral that could return Brazil to its high-inflation past.”  ·  “Inflation, although accelerating from the previous year, remained under 10 percent.”

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