July 2010 Monetary Policy Report

The report now describes economic activity expanding moderately, with lower inflation and weaker growth projections than in February. Financial conditions deteriorated due to European fiscal concerns, while the Federal Reserve concluded its asset purchases and closed special liquidity facilities. The FOMC considered possible further stimulus if the outlook worsened.

Inflation

• The report now says inflation diminished further in the first half of 2010, with overall PCE inflation at only 3/4 percent annualized. Read the section
  Quotes

  This report: “Headline consumer price inflation has been low this year, as energy prices have dropped and core inflation has slowed.”  ·  “Inflation diminished further in the first half of 2010.”  ·  “the overall PCE chain-type price index increased at an annual rate of just 3/4 percent between December 2009 and May 2010”

• The report now projects PCE inflation of 1.0 to 1.1 percent for 2010, lower than the previous 1.4 to 1.7 percent. Read the section
  Quotes

  Previous report: “The central tendency of their projections for personal consumption expenditures (PCE) inflation was 1.4 to 1.7 percent for 2010, 1.1 to 2.0 percent for 2011, and 1.3 to 2.0 percent for 2012.”

  This report: “The central tendency of their projections for personal consumption expenditures (PCE) inflation was 1.0 to 1.1 percent for 2010”

Economic activity

• The report now describes economic activity expanding at a moderate pace in the first half of 2010, whereas the previous report noted continued contraction in employment. Read the section
  Quotes

  Previous report: “Despite the pickup in output, employment continued to contract in the second half of 2009, albeit at a markedly slower pace than in the first half.”

  This report: “Economic activity expanded at a moderate pace in the first half of 2010 after picking up in the second half of 2009.”

• The report now describes modest downward revisions to real GDP growth projections for 2010-2012, whereas the previous report noted modest upward revisions for 2010. Read the section
  Quotes

  Previous report: “a few participants made modest upward revisions to their projections for real GDP growth in 2010”

  This report: “participants generally made modest downward revisions to their projections for real GDP growth for the years 2010 to 2012, as well as modest upward revisions to their projections for the unemployment rate for the same period”

Financial conditions

• The report now highlights financial market volatility and equity price declines due to European fiscal concerns, whereas the previous report noted improved conditions with rising equity indexes. Read the section
  Quotes

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

  This report: “uncertainty about the consequences of the fiscal pressures in a number of European countries and about the durability of the global recovery led to large declines in equity prices around the world and produced strains in some short-term funding markets.”

• The report now describes global financial markets as roiled by the Greek fiscal crisis, replacing the earlier emphasis on recovery and stabilization. Read the section
  Quotes

  Previous 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.”

  This report: “In recent months, global financial markets have been roiled by the Greek fiscal crisis and the resultant concerns about the European outlook more broadly.”  ·  “On net for the first half of the year, the dollar has appreciated, and foreign stock markets and the yields on benchmark sovereign bonds have moved down.”

Monetary policy

• The report now states that the Federal Reserve concluded its purchases of agency MBS and agency debt at the end of March, whereas the previous report noted progress toward completing them. Read the section
  Quotes

  Previous report: “completing purchases of $300 billion in Treasury securities and making considerable progress toward completing its announced purchases of $1.25 trillion of agency mortgage-backed securities (MBS) and about $175 billion of agency debt.”

  This report: “At the end of March, the Federal Reserve concluded its purchases of agency mortgage-backed securities (MBS) and agency debt under its large-scale asset purchase programs”

• The report now notes that all special liquidity facilities were closed by the end of June, whereas the previous report mentioned that some had expired in February. Read the section
  Quotes

  Previous report: “given the overall improvement in funding markets, the Federal Reserve allowed the Primary Dealer Credit Facility, the Term Securities Lending Facility, the Commercial Paper Funding Facility, and the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility to expire.”

  This report: “by the end of June the Federal Reserve had closed all of the special liquidity facilities that it had created to support markets during the crisis.”

• The report now mentions that the Committee considered whether further policy stimulus might become appropriate if the economic outlook worsened appreciably, a consideration not noted in the previous report. Read the section
  Quotes

  This report: “the Committee would need to consider whether further policy stimulus might become appropriate if the economic outlook were to worsen appreciably.”

Projections

• The report now says about one-half of participants saw downside risks to growth, whereas previously nearly all judged risks as generally balanced. Read the section
  Quotes

  Previous report: “nearly all participants judged the risks to their growth outlook as generally balanced, and most also saw roughly balanced risks surrounding their inflation projections”

  This report: “About one-half of the participants now judged the risks to the growth outlook to be tilted to the downside, while most continued to see balanced risks surrounding their inflation projections.”

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