March 2023 Monetary Policy Report

The report now describes a more subdued economy, with GDP growth downgraded and inflation easing, while the FOMC has raised rates by 3 percentage points and reduced securities holdings. Financial conditions have tightened further, and the report adds new details on bank lending standards and the Fed's deferred asset.

Inflation

• The report now describes core PCE inflation as having declined to 4.7 percent in January, whereas the previous report had it unchanged at 4.9 percent in April. Read the section
  Quotes

  Previous report: “the 12-month measure of core PCE inflation rose initially and then fell back to 4.9 percent in April, unchanged from December.”

  This report: “Core PCE prices—which exclude volatile food and energy prices and are generally considered a better guide to the direction of future inflation—rose 4.7 percent over the 12 months to January, down from the above 5 percent pace that prevailed last spring.”

Labor market

• The unemployment rate is now 3.4 percent in January, slightly below its pre-pandemic level, whereas previously it was 3.6 percent in May, near a 50-year low. Read the section
  Quotes

  Previous 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”

  This report: “At 3.4 percent in January, the jobless rate was a touch below its level right before the pandemic.”

Economic activity

• The report now projects real GDP growth of 0.4–0.5 percent for 2022 and 0.2–0.3 percent for 2023, a sharp downgrade from the previous 1.7 percent median for 2022. Read the section
  Quotes

  Previous report: “Median: 2022: 1.7”  ·  “Median: 2022: 1.7”

  This report: “0.4 - 0.5: Percent Range: 2; 2022: 17; 2023: 1; 2024: 7; Longer Run: 1”  ·  “0.2 - 0.3: Percent Range: 13; 2022: 2; 2023: 2”

Financial conditions

• The report now says financial conditions have tightened further since June and are significantly tighter than a year ago, whereas the previous report noted tightening over the year to June. Read the section
  Quotes

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

  This report: “Financial conditions have tightened further since June and are significantly tighter than a year ago.”

• Banks now report tighter standards and weaker demand for most loan categories, whereas the previous report noted strong loan demand and strengthening demand. Read the section
  Quotes

  Previous report: “Growth was particularly strong for commercial and industrial and credit card loans, for which demand continued to strengthen in the first quarter according to the April 2022 Senior Loan Officer Opinion Survey on Bank Lending Practices.”

  This report: “Banks reported tighter standards and weaker demand for most loan categories over the third and fourth quarters of 2022 in the October and January Senior Loan Officer Opinion Surveys on Bank Lending Practices.”

International

• The report now notes a recovery in China after abandoning zero-COVID, replacing the earlier description of sharp slowing due to lockdowns. Read the section
  Quotes

  Previous report: “The slowing of activity has been particularly sharp in China, with recent indicators plunging amid COVID-related mobility restrictions.”

  This report: “More recently, however, economic indicators suggest that a recovery has started to take hold in China following the rapid abandonment of its zero-COVID policy.”

Monetary policy

• The report now states the target range is 4-1/2 to 4-3/4 percent, up from 1-1/2 to 1-3/4 percent in the previous report, reflecting a 3 percentage point increase since June. Read the section
  Quotes

  Previous report: “bringing it to 1-1/2 to 1-3/4 percent following the June meeting”  ·  “The Committee raised the target range again in May and June, bringing it to the current range of 1-1/2 to 1-3/4 percent”

  This report: “The Committee has raised the target range for the federal funds rate a further 3 percentage points since June, bringing the range to 4-1/2 to 4-3/4 percent”  ·  “bringing it to the current range of 4-1/2 to 4-3/4 percent.”

• The report now notes securities holdings have been reduced by about $500 billion since June, whereas the previous report described the initial reduction plans and start in June. Read the section
  Quotes

  Previous report: “The Committee ceased net asset purchases in early March and began reducing its securities holdings in June.”  ·  “the Committee announced in May its specific plans for significantly reducing its securities holdings and that these reductions would begin on June 1”

  This report: “The Federal Reserve has also reduced its holdings of Treasury securities and agency mortgage-backed securities by about $500 billion since June, further tightening financial conditions.”  ·  “The Federal Reserve has continued the process of significantly reducing its holdings of Treasury and agency securities in a predictable manner.”

• The report now includes a new topic on the Federal Reserve's negative net income and a deferred asset of about $36 billion, which was not mentioned in the previous report. Read the section
  Quotes

  This report: “Because the Federal Reserve no longer has positive net income to remit to the Treasury Department, as of February 2023, the Federal Reserve's balance sheet now reports a deferred asset of about $36 billion.”  ·  “Negative net income and the associated deferred asset do not affect the Federal Reserve's conduct of monetary policy or its ability to meet its financial obligations.”

• The report now describes the FOMC as having expeditiously raised the target range and reduced securities holdings at a historically rapid pace, a stronger characterization than the previous report's ongoing increases. Read the section
  Quotes

  Previous report: “Starting in March, the Federal Open Market Committee (FOMC) began raising the target range for the federal funds rate and indicated that it anticipates that ongoing increases in the target range will be appropriate.”

  This report: “Also because of the persistently high levels of inflation, the Federal Open Market Committee (FOMC) has expeditiously raised the target range for the federal funds rate and has reduced its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a historically rapid pace.”

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