February 2002 Monetary Policy Report

The report now expects slightly higher consumer price inflation in 2002, while emphasizing last year's decline driven by energy prices. It also notes continued tightening of bank loan terms and a subdued foreign outlook, with a rebound abroad following, not leading, a U.S. recovery.

Inflation

• The report now expects slightly higher consumer price inflation in 2002 than in 2001, whereas the previous report saw inflation well contained over the next year and a half. Read the section
  Quotes

  Previous report: “inflation is expected to be well contained over the next year and a half”

  This report: “Federal Reserve policymakers believe that consumer prices will increase slightly more rapidly in 2002 than in 2001”

• The report now emphasizes a decline in inflation last year, driven by a sharp drop in energy prices, whereas the previous report described inflation as having picked up early in the year before moderating. Read the section
  Quotes

  Previous report: “More recently, however, energy prices have moved lower, and the monthly readings on core inflation have returned to more moderate rates.”

  This report: “Inflation declined last year, pulled down by a sharp drop in energy prices.”

Financial conditions

• The report now says banks have continued to tighten loan terms and standards, whereas the previous report noted tighter lending standards as a restraining factor. Read the section
  Quotes

  Previous 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”

  This report: “Banks have continued to tighten terms and standards on loans, and risk spreads have increased a little this year.”

International

• The report now says foreign activity remains subdued and a rebound abroad will follow, not lead, a U.S. rebound, whereas the previous report only noted foreign slowdowns limiting exports. Read the section
  Quotes

  Previous report: “At the same time, foreign economies have slowed, limiting the demand for U.S. exports.”

  This report: “Activity abroad remains subdued, and a rebound of foreign output is likely to follow, not lead, a rebound in the United States.”

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