July 2001 Monetary Policy Report

The report now describes weaker labor markets and lower growth projections, with unemployment expected to rise. It also notes tighter financial conditions and a moderation in core inflation, while dropping references to unchanged policy rates. External deficits narrowed sharply.

Inflation

• The report now says core inflation picked up early in the year but has since moderated, whereas the previous report had described core inflation as remaining low throughout 2000. Read the section
  Quotes

  Previous report: “Core inflation remained low in 2000 in the face of sharp increases in energy prices.”  ·  “Against this backdrop, core inflation remained low in 2000.”

  This report: “More recently, however, energy prices have moved lower, and the monthly readings on core inflation have returned to more moderate rates.”  ·  “Inflation moved higher in early 2001 but has moderated some in recent months.”

Labor market

• The report now notes weakness has become more persistent and widespread, with unemployment expected to rise to 4-3/4 to 5 percent, replacing the earlier view of exceptionally tight markets and a 4-1/2 percent forecast. Read the section
  Quotes

  Previous report: “labor markets remained exceptionally tight”  ·  “Most of the governors and Reserve Bank presidents are forecasting that the average unemployment rate in the fourth quarter of this year will be about 4-1/2 percent, still quite low by historical standards.”

  This report: “As the year has unfolded, the weakness has become more persistent and widespread than had seemed likely last autumn.”  ·  “is expected to move up to the area of 4-3/4 percent to 5 percent by the end of this year”

• The report now describes the unemployment rate as having risen half a percentage point to 4-1/2 percent in June, whereas the previous report had noted it was little changed near 4 percent. Read the section
  Quotes

  Previous report: “On net, the unemployment rate changed little; its fourth-quarter average of 4.0 percent was down just a tenth of a percentage point from the average unemployment rate in the fourth quarter of 1999.”

  This report: “the unemployment rate in June stood at 4-1/2 percent, 1/2 percentage point higher than in the fourth quarter of last year.”  ·  “the unemployment rate ... in June stood at 4-1/2 percent, 1/2 percentage point higher than in the fourth quarter of last year.”

Financial conditions

• The report now says dollar appreciation, lower equity prices, and tighter bank lending standards are restraining demand, whereas the February report emphasized improvements in credit conditions and equity gains. Read the section
  Quotes

  Previous report: “The Committee's action improved financial conditions to a degree”  ·  “financial markets are shifting away from restraint, and this shift should create a more favorable underpinning to the expected pickup in the economy as the year progresses.”

  This report: “other financial developments, including a higher foreign exchange value of the dollar, lower equity prices, and tighter lending terms and standards at banks, were tending to restrain aggregate demand”

International

• The report now notes the U.S. external deficits narrowed sharply in the first quarter, whereas the previous report had described exports rising and then faltering in the fourth quarter. Read the section
  Quotes

  Previous report: “U.S. exports of goods and services rose an estimated 7 percent in real terms during 2000.”  ·  “Based on data for October and November, real exports are estimated to have declined in the fourth quarter, reflecting in part a slowing of economic growth abroad.”

  This report: “The deficits in U.S. external balances narrowed sharply in the first quarter of this year”  ·  “After widening continuously during the past four years, the deficits in U.S. external balances narrowed in the first quarter of 2001.”

Monetary policy

• The report no longer mentions that the FOMC left the federal funds rate unchanged at its June, August, October, and November meetings. Read the section
  Quotes

  Previous report: “the FOMC left the federal funds rate unchanged”

Projections

• The report now projects real GDP growth of 1-1/4 to 2 percent for 2001 and 3 to 3-1/4 percent for 2002, replacing the earlier emphasis on a near-term pickup and fourth-quarter unemployment of 4-1/2 percent. Read the section
  Quotes

  Previous report: “Most of the governors and Reserve Bank presidents are forecasting that the average unemployment rate in the fourth quarter of this year will be about 4-1/2 percent, still quite low by historical standards.”

  This report: “the central tendency of the forecasts for the increase in real GDP over the four quarters of 2001 spans a range of 1-1/4 percent to 2 percent”  ·  “the central tendency of the forecasts for real GDP growth in 2002 is 3 percent to 3-1/4 percent”

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