June 2022 Monetary Policy Report

The report now describes a marked tightening of monetary policy, with the FOMC raising rates and reducing its balance sheet, and notes significantly higher inflation and tighter financial conditions. It also reports weaker economic activity and a stronger labor market, with unemployment below longer-run estimates.

Inflation

• The report now says some inflation measures are at their highest in over 40 years, whereas previously it cited PCE inflation at 5.8 percent as the highest in about 40 years. Read the section
  Quotes

  Previous report: “inflation rose to its highest level since the early 1980s”  ·  “The personal consumption expenditures (PCE) price index rose 5.8 percent over the 12 months ending in December, and the index that excludes food and energy items (so-called core inflation) was up 4.9 percent—the highest readings for both measures in roughly 40 years.”

  This report: “inflation remained well above the Federal Open Market Committee's (FOMC) longer-run objective of 2 percent, with some inflation measures rising to their highest levels in more than 40 years.”

• The report now describes PCE inflation at 6.3 percent in April, up from 5.8 percent in December, and highlights food and energy price surges. Read the section
  Quotes

  Previous report: “bringing the 12-month change in December to 5.8 percent—far above the Federal Open Market Committee's (FOMC) longer-run objective of 2 percent”  ·  “the price index for personal consumption expenditures (PCE) rising 5.8 percent over the 12 months through December, following a subdued increase of 1.3 percent in 2020.”

  This report: “the change over the 12 months ending in April stood at 6.3 percent (figure 1). This pace is well above the FOMC's longer-run objective of 2 percent.”  ·  “Grocery prices increased at a very rapid pace of 10 percent over the 12 months ending in April, more than 4 percentage points faster than over the 12 months ending in December and the highest reading since 1981”  ·  “The PCE price index for energy increased 30 percent over the 12 months ending in April, about the same pace as over the 12 months ending in December.”

• The report now highlights that near-term inflation expectations reached their highest since 1981, and longer-term expectations moved up to near the top of their 25-year range. Read the section
  Quotes

  Previous report: “households' expectations for inflation over the next 12 months continued to climb, reaching levels that are among the highest observed since the early 1980s”  ·  “expectations for average inflation over the next 5 to 10 years from the same survey flattened out in the second half of 2021 after having moved up modestly in the first half”

  This report: “Measures of near-term inflation expectations continued to rise markedly”  ·  “the median value for inflation expectations over the next year jumped to 5.4 percent in March, its highest level since November 1981”  ·  “The Michigan survey's median inflation expectation for the next 5 to 10 years rose to 3.3 percent in the June preliminary reading. If confirmed, this reading would be near the top of the range from the past 25 years.”

Labor market

• The report now says the unemployment rate fell noticeably below the FOMC's longer-run estimates, whereas previously it had reached the median of those estimates. Read the section
  Quotes

  Previous report: “the unemployment rate reaching the median of Federal Open Market Committee (FOMC) participants' estimates of its longer-run normal level”  ·  “the unemployment rate has plummeted almost 2 percentage points since June and, at 4 percent in January, has reached the median of FOMC participants' estimates of its longer-run normal level.”

  This report: “the unemployment rate fell noticeably below the median of FOMC participants' estimates of its longer-run normal level”

• The report now notes the unemployment rate fell to 3.6 percent in May, near a 50-year low, and employment for most demographic groups has recovered to near pre-pandemic levels. Read the section
  Quotes

  Previous report: “the unemployment rate continued to move down rapidly, declining from 6.7 percent at the end of 2020 to 4.0 percent this January (figure 2).”  ·  “the recovery in employment—though rapid—has been incomplete, with payrolls nearly 3 million below their pre-pandemic level as of January.”

  This report: “the unemployment rate, which fell 0.3 percentage point over the first five months of the year to 3.6 percent in May, just above the bottom of its range over the past 50 years”  ·  “Now employment and real earnings of nearly all major demographic groups are near or above their levels before the pandemic, and employment rates are again near multidecade highs.”

Economic activity

• The report now says economic activity edged down in the first quarter, whereas previously it described impressive gains in the second half of last year. Read the section
  Quotes

  Previous report: “U.S. economic activity posted further impressive gains in the second half of last year”  ·  “gross domestic product (GDP) growth slowed somewhat from its brisk first-half pace but nevertheless rose at a solid annualized rate of 4.6 percent.”

  This report: “overall economic activity edged down in the first quarter, household spending and business fixed investment remained strong”

• The report now projects real GDP growth for 2022 at 1.7 percent, down from 4.0 percent in the previous report, indicating a marked downgrade. Read the section
  Quotes

  Previous report: “4.0 - 4.1: 2022: 1; 2023: 3”

  This report: “Median: 2022: 1.7”

Financial conditions

• The report now says financial conditions have tightened significantly, whereas previously they were described as accommodative. Read the section
  Quotes

  Previous report: “All told, financing conditions have been accommodative for businesses and households.”

  This report: “Financial conditions have tightened significantly this year.”

• The report now describes nominal Treasury yields as rising considerably since late February, driven mainly by higher real yields, whereas the previous report noted a rise since early July. Read the section
  Quotes

  Previous report: “Yields on nominal Treasury securities across maturities have risen notably since early July, with much of the increase having occurred in the past couple of months as the anticipation for an imminent start to the removal of monetary accommodation has firmed (figure 32).”

  This report: “Yields on nominal Treasury securities across maturities have risen considerably since late February (figure 33). ... The increases in nominal Treasury yields were primarily accounted for by rising real yields.”

Monetary policy

• The report now says the FOMC raised the target range to 1-1/2 to 1-3/4 percent, whereas previously it held the rate near zero. Read the section
  Quotes

  Previous report: “the FOMC held its policy rate near zero to support the continued economic recovery”  ·  “The FOMC has continued to keep the target range for the federal funds rate at 0 to 1/4 percent since the previous Monetary Policy Report.”

  This report: “bringing it to 1-1/2 to 1-3/4 percent following the June meeting”

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