February 2010 Monetary Policy Report

The report now describes a broad recovery in financial markets, with improved conditions and tighter credit, and notes a rebound in trade flows. It emphasizes heightened bank delinquency rates and the closure of several liquidity facilities. The outlook for activity and unemployment has stabilized, while inflation is expected to remain subdued.

Inflation

• The report now says inflation would remain subdued over the projection period, rather than merely slower this year than in recent years. Read the section
  Quotes

  Previous report: “All participants also expected that overall inflation would be somewhat slower this year than in recent years”

  This report: “Most participants also anticipated that inflation would remain subdued over this period.”

Labor market

• The report now describes the unemployment rate as declining slowly over the next few years, whereas previously it was projected to rise in coming quarters. Read the section
  Quotes

  Previous report: “all FOMC participants projected that real gross domestic product (GDP) would contract over the entirety of this year and that the unemployment rate would increase in coming quarters.”

  This report: “the unemployment rate declining slowly over the next few years”

Economic activity

• The report now describes economic activity as stabilizing with a slow recovery expected, whereas the previous report described activity as still falling sharply. Read the section
  Quotes

  Previous report: “Economic activity continued to fall sharply, with widespread declines in payroll employment and industrial production.”

  This report: “meeting participants generally saw the economy as likely to recover only slowly during the second half of 2009 and as still vulnerable to adverse shocks.”

Financial conditions

• The report now highlights improved financial market conditions with rising equity indexes and narrowing risk spreads, whereas the previous report noted easing but persistent strains. Read the section
  Quotes

  Previous report: “financial conditions have eased somewhat ... Nonetheless, credit conditions for many households and businesses remain tight, and financial markets are still stressed.”

  This report: “Broad equity price indexes increased further, on balance, and risk spreads on corporate bonds narrowed considerably.”

• The report now emphasizes that credit remained tight with continued tightening of loan standards, whereas the previous report noted improved financial market conditions. Read the section
  Quotes

  Previous report: “Participants noted that financial market conditions had generally strengthened”

  This report: “credit remained tight, with many banks reporting that they continued to tighten loan standards and terms.”

Financial stability

• The report now emphasizes rising delinquency and charge-off rates at commercial banks, whereas the previous report focused on easing strains in short-term funding markets. Read the section
  Quotes

  Previous report: “strains in short-term funding markets have eased, with some credit spreads in those markets returning close to pre-crisis levels.”

  This report: “Still, delinquency and charge-off rates at commercial banks increased further in the second half of the year, and loan losses remained very high.”

International

• The report now describes a broad recovery in global financial markets in 2009, whereas the previous report noted gradual improvement from severe stress. Read the section
  Quotes

  Previous report: “These markets remained more stressed than before the financial crisis, but their functioning continued to gradually improve from the serious disarray that occurred last fall.”

  This report: “Global financial markets recovered considerably in 2009 as the effectiveness of central bank and government actions in stabilizing the financial system became more apparent and as signs of economic recovery began to take hold.”

• The report now notes a rebound in U.S. trade flows in the second half of 2009, a shift from the previous report's description of continued declines abroad. Read the section
  Quotes

  Previous report: “Economic activity abroad plummeted in the first quarter and has continued to fall, albeit more slowly, in recent months.”

  This report: “With the recovery in U.S. and foreign demand, U.S. trade flows rebounded in the second half of 2009 after precipitous declines late in 2008 and early in 2009.”

• The report now says the Bank of England increased its Asset Purchase Facility to £200 billion, whereas the previous report mentioned up to £125 billion. Read the section
  Quotes

  Previous report: “The Bank of England established an Asset Purchase Facility to purchase up to £125 billion in government and corporate debt”

  This report: “increasing its Asset Purchase Facility from £50 billion to £200 billion over the course of the year.”

Monetary policy

• The report now notes that usage of special liquidity facilities declined sharply and that the Federal Reserve closed several facilities on February 1, 2010. Read the section
  Quotes

  This report: “the usage of special liquidity facilities declined sharply, and the Federal Reserve closed several of those facilities on February 1, 2010.”

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