February 2019 Monetary Policy Report

The report now emphasizes the FOMC's patience in future rate adjustments, a shift from further gradual increases, and notes financial conditions have become less supportive. It also highlights a significant slowdown in foreign growth and a decline in inflation to near the 2 percent objective.

Inflation

• The report now says inflation is near the 2 percent objective, whereas previously it was above, reflecting a decline in headline inflation. Read the section
  Quotes

  Previous report: “Inflation has moved up, and in May, the most recent period for which data are available, inflation measured on a 12-month basis was a little above the Federal Open Market Committee's (FOMC) longer-run objective of 2 percent, boosted by a sizable increase in energy prices.”  ·  “Consumer price inflation, as measured by the 12-month percentage change in the price index for personal consumption expenditures, moved up from a little below the FOMC's objective of 2 percent at the end of last year to 2.3 percent in May, boosted by a sizable increase in consumer energy prices.”

  This report: “Inflation has been near the Federal Open Market Committee's (FOMC) longer-run objective of 2 percent, aside from the transitory effects of recent energy price movements.”  ·  “Consumer price inflation, as measured by the 12-month change in the price index for personal consumption expenditures, moved down from a little above the FOMC's objective of 2 percent in the middle of last year to an estimated 1.7 percent in December, restrained by recent declines in consumer energy prices.”

• The report now says crude oil prices fell sharply after peaking in early October and have averaged around $60 per barrel, whereas previously they had risen to around $75 per barrel. Read the section
  Quotes

  Previous report: “The spot price of Brent crude oil rose from about $65 per barrel in December to around $75 per barrel in early July (figure 9).”

  This report: “After peaking at about $86 per barrel in early October, the price of crude oil subsequently fell sharply and has averaged around $60 per barrel this year (figure 9).”

• The report now says market-based measures of inflation compensation have declined since early 2018, with TIPS-based forward compensation about 1-3/4 percent, whereas previously they had moved sideways and were about 2 percent. Read the section
  Quotes

  Previous report: “Measures of longer-term inflation compensation--derived either from differences between yields on nominal Treasury securities and those on comparable-maturity Treasury Inflation-Protected Securities (TIPS) or from inflation swaps--have moved sideways for the most part this year”  ·  “The TIPS-based measure of 5-to-10-year-forward inflation compensation and the analogous measure of inflation swaps are now about 2 percent and 2-1/2 percent, respectively”

  This report: “market-based measures of inflation compensation have come down since the first half of 2018”  ·  “The TIPS-based measure of 5-to-10-year-forward inflation compensation and the analogous measure from inflation swaps are now about 1-3/4 percent and 2-1/4 percent”

Labor market

• The report now describes compensation growth as having stepped up further since June 2018, with the employment cost index up 3 percent, the strongest in nearly 10 years, whereas previously gains were around 2-3/4 percent. Read the section
  Quotes

  Previous report: “Compensation per hour in the business sector--a broad-based measure of wages, salaries, and benefits that is quite volatile--rose 2-3/4 percent over the four quarters ending in 2018:Q1”  ·  “average hourly earnings rose 2-3/4 percent in June relative to 12 months earlier, a gain in line with the average increase in the preceding few years”

  This report: “Most available indicators suggest that growth of hourly compensation has stepped up further since June 2018 after having firmed somewhat over the past few years; however, growth rates remain moderate compared with those that prevailed in the decade before the recession.”  ·  “The employment cost index, a less volatile measure of both wages and the cost to employers of providing benefits, increased 3 percent over the same period, while average hourly earnings--which do not take account of benefits--increased 3.2 percent over the 12 months ending in January of this year; the annual increases in both of these measures were the strongest in nearly 10 years.”

• The report now includes a new special topic on employment disparities between rural and urban areas, noting wider gaps in employment-to-population ratios and attributing them to labor force participation differences. Read the section
  Quotes

  This report: “the prime-age EPOP is now slightly above its pre-recession level in larger urban areas, whereas it is just below its pre-recession average in smaller urban areas and much below its pre-recession level in rural areas”  ·  “The divergence in rural and urban EPOP ratios during the economic expansion almost entirely reflects divergences in LFPRs rather than in unemployment rates”  ·  “the recent widening of the rural-urban disparity in EPOP ratios has not been primarily driven by differences in years of education”

Financial conditions

• The report now says financial conditions have become less supportive of growth, whereas previously they were supportive. Read the section
  Quotes

  Previous report: “Domestic financial conditions for businesses and households have generally continued to support economic growth.”

  This report: “Domestic financial conditions for businesses and households have become less supportive of economic growth since July.”

International

• The report now notes a significant slowdown in foreign growth, whereas previously it described solid growth. Read the section
  Quotes

  Previous report: “Foreign economic growth has remained solid, and net exports had a roughly neutral effect on real U.S. GDP growth in the first quarter. ... Foreign financial conditions remain generally supportive of growth despite recent increases in financial stress in several emerging market economies.”

  This report: “Foreign economic growth stepped down significantly last year from the brisk pace in 2017.”

Monetary policy

• The report now emphasizes the FOMC's patience in future rate adjustments, a shift from the previous emphasis on further gradual increases. Read the section
  Quotes

  Previous report: “The FOMC expects that further gradual increases in the target range for the federal funds rate will be consistent with a sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term.”

  This report: “the FOMC indicated at its January meeting that it will be patient as it determines what future adjustments to the federal funds rate may be appropriate”  ·  “the Committee noted that it will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate”

• The report now emphasizes patience in determining future rate adjustments, citing global developments and muted inflation, a shift from the previous emphasis on a gradual approach. Read the section
  Quotes

  Previous report: “The Committee expects that a gradual approach to increasing the target range for the federal funds rate will be consistent with a sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term.”

  This report: “in light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the federal funds rate may be appropriate”

• The report now attributes the decline in the expected policy path to global downside risks, trade tensions, and FOMC communications signaling patience, whereas the previous report cited a stronger domestic outlook and employment reports. Read the section
  Quotes

  Previous report: “Relative to the end of last year, the expected policy rate path has moved up, boosted in part by investors' perception of a strengthening in the domestic economic outlook.”  ·  “In particular, the policy path moved higher in response to incoming economic data so far this year, especially the employment reports, which were seen as supporting expectations for a solid pace of growth in domestic economic activity.”

  This report: “including increased investor concerns about downside risks to the global economic outlook and rising trade tensions, as well as FOMC communications that were viewed as signaling patience and greater flexibility”

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