June 2023 Monetary Policy Report

The report now describes inflation as having moderated, with a lower PCE rate, and the labor market as very tight with slower job gains. It notes the FOMC raised rates by 75 basis points to 5-5.25 percent and will consider cumulative tightening and policy lags. New topics cover bank stress and lending conditions, while balance sheet changes show increased assets and reserves.

Inflation

• The report now describes inflation as having 'moderated' rather than 'slowed,' and cites a lower PCE inflation rate of 4.4 percent in April, down from 5.4 percent in January. Read the section
  Quotes

  Previous report: “Although inflation has slowed since the middle of last year as supply bottlenecks eased and energy prices declined, it remains well above the Federal Open Market Committee's (FOMC) objective of 2 percent.”  ·  “Consumer price inflation, as measured by the 12-month change in the price index for personal consumption expenditures (PCE), was 5.4 percent in January, down from its peak of 7 percent last June but still well above the FOMC's 2 percent objective.”

  This report: “Although inflation has moderated somewhat since the middle of last year, it remains well above the Federal Open Market Committee's (FOMC) objective of 2 percent.”  ·  “Consumer price inflation, as measured by the 12-month change in the price index for personal consumption expenditures (PCE), was 4.4 percent in April, down from its peak of 7.0 percent last June but still well above the FOMC's 2 percent objective.”

Labor market

• The report now characterizes the labor market as 'very tight' instead of 'extremely tight,' and notes job gains averaging 314,000 per month, down from 380,000. Read the section
  Quotes

  Previous report: “The labor market remains extremely tight, with robust job gains, the unemployment rate at historically low levels, and nominal wage growth slowing but still elevated.”  ·  “The labor market has remained extremely tight, with job gains averaging 380,000 per month since the middle of last year and the unemployment rate remaining at historical lows.”

  This report: “The labor market continues to be very tight, with robust job gains and the unemployment rate near historically low levels, though nominal wage growth has shown some signs of easing and job vacancies have declined.”  ·  “The labor market has remained very tight, with job gains averaging 314,000 per month during the first five months of the year and the unemployment rate remaining near historical lows.”

Financial conditions

• The report now describes market-based expectations for the federal funds rate path as rising through early 2025 but little changed for late 2025 and 2026, whereas previously the path shifted up notably through 2024. Read the section
  Quotes

  Previous report: “Market-based measures of the path of the federal funds rate expected to prevail through the first half of 2024 also shifted up notably over the same period (figure 32).”

  This report: “Market-based measures of the path of the federal funds rate expected to prevail through the start of 2025 also rose over this period, while market-implied expectations for late 2025 and 2026 are little changed on net”

Financial stability

• The report now includes a new special topic on bank lending conditions, highlighting banking-sector stress in March, deposit outflows, and expectations of further tightening in lending standards. Read the section
  Quotes

  This report: “the recent stress in the banking sector has reportedly led to additional tightening in credit conditions at some banks.”  ·  “deposit outflows have reduced an important source of funding for banks, as investors have shifted toward higher-yielding alternative investment vehicles, such as money market funds (MMFs).”  ·  “Banks reported additional tightening in the April 2023 SLOOS and indicated that they expect to further tighten their lending standards over the remainder of 2023.”

• The report now describes the failures of three sizable domestic banks due to deposit outflows from poor interest rate and liquidity risk management, a new development not in the previous report. Read the section
  Quotes

  This report: “Since the previous Monetary Policy Report, three sizable domestic banks failed following substantial deposit outflows prompted by concerns over poor management of interest rate risk and liquidity risk.”

International

• The report now describes a rebound in foreign activity early this year, whereas the previous report noted a slowdown in late 2022. Read the section
  Quotes

  Previous report: “Following solid growth early last year, foreign economic growth slowed, especially at the end of the year, weighed down by a COVID-related slowdown in China, the economic fallout of Russia's war against Ukraine, and tighter financial conditions.”

  This report: “Following a slowdown at the end of 2022, foreign activity rebounded early this year, driven in part by strong growth in China, as the lifting of COVID-19 restrictions unleashed pent-up demand and some fiscal stimulus was front-loaded.”

Monetary policy

• The report now states the FOMC raised the federal funds rate target range by 75 basis points since the start of the year to 5 to 5-1/4 percent, up from 4-1/2 to 4-3/4 percent. Read the section
  Quotes

  Previous 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.”

  This report: “The FOMC has raised the target range for the federal funds rate a further 75 basis points since the start of the year, bringing the range to 5 to 5-1/4 percent.”  ·  “The FOMC continued to increase the target range for the federal funds rate, bringing it to the current range of 5 to 5-1/4 percent.”

• The report now says the FOMC will consider cumulative tightening and policy lags in deciding further firming, replacing the previous statement that ongoing increases would be appropriate. Read the section
  Quotes

  Previous report: “indicated that it anticipates that ongoing increases in the target range will be appropriate”

  This report: “In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, the FOMC indicated that it will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”

• The report now notes that total assets increased by $49 billion to about $8.4 trillion, whereas the previous report said they had decreased by $550 billion to the same total. Read the section
  Quotes

  Previous report: “Since that time, total assets have decreased by $550 billion, leaving the total size of the balance sheet at about $8.4 trillion.”

  This report: “total assets have increased $49 billion, leaving the total size of the balance sheet at about $8.4 trillion”

• The report now says reserve balances increased by about $278 billion since March 2023, whereas the previous report said they had fallen by about $200 billion. Read the section
  Quotes

  Previous report: “Reserve balances have fallen by about $200 billion to around $3 trillion over that period.”

  This report: “Reserve balances—the largest liability of the Federal Reserve's balance sheet—have increased by about $278 billion since March 2023”

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