February 2025 Monetary Policy Report

The report now describes inflation as 'somewhat above' the 2 percent objective and highlights uneven progress, while noting the labor market has stabilized. It records the FOMC's 100 basis point rate cut to 4-1/4 to 4-1/2 percent, citing greater confidence in inflation, and updates balance sheet reduction to about $2 trillion. Financial conditions and international developments also show notable shifts.

Inflation

• The report now describes inflation as 'somewhat above' the 2 percent objective, whereas previously it was 'above,' indicating a slight moderation in the assessment. Read the section
  Quotes

  Previous report: “Inflation eased notably last year and has shown modest further progress so far this year, but it remains above the Federal Open Market Committee's (FOMC) objective of 2 percent.”

  This report: “Inflation moderated a little further last year after having slowed notably in 2023, but it remains somewhat above the Federal Open Market Committee's (FOMC) objective of 2 percent.”

• The report now emphasizes uneven progress with services inflation and wage growth above objectives, whereas previously it noted slower-than-expected disinflation. Read the section
  Quotes

  Previous report: “That said, the pace of disinflation has proved to be slower than expected and uneven across countries and economic sectors.”

  This report: “However, progress on inflation reduction remains uneven across economies and sectors, with services inflation and wage growth still running above levels consistent with central banks' inflation objectives in several economies.”

• The median PCE inflation projection for 2024 is now 2.5 percent, down from 2.6 percent in the previous report. Read the section
  Quotes

  Previous report: “Median: 2024: 2.6; 2025: 2.3; 2026: 2.0”

  This report: “Median: 2024: 2.5; 2025: 2.1; 2026: 2.0; 2027: 1.9; Longer run: 1.8”

Labor market

• The report now says the labor market has 'stabilized' with unemployment flattening, replacing the earlier emphasis on strong job gains and ongoing rebalancing. Read the section
  Quotes

  Previous report: “Job gains have been strong, and the unemployment rate is still low.”  ·  “Meanwhile, as job vacancies continued to decline and labor supply continued to increase, the labor market moved into better balance over the first half of the year.”

  This report: “The labor market appears to have stabilized following a period of easing, with the unemployment rate flattening out at a relatively low level over the second half of last year.”

Financial conditions

• The report now describes long-term Treasury yields as increasing markedly since July, while short-term yields declined, a shift from the earlier moderate rise across maturities. Read the section
  Quotes

  Previous report: “On balance, nominal Treasury yields are moderately higher than at the beginning of the year across the maturity spectrum (figure 34).”

  This report: “While short-term Treasury yields declined somewhat, on net, since last July, yields on long-term nominal Treasury securities increased markedly on balance.”  ·  “After declining from early summer to mid-September to a level just above 3.6 percent, the 10-year Treasury yield rose notably, reaching a level of 4.6 percent by early February (figure 35).”

International

• The report now highlights Asian high-tech export strength tied to U.S. AI demand, replacing the earlier emphasis on a broad rebound in EME exports. Read the section
  Quotes

  Previous report: “In EMEs, economic growth was supported by a rebound in exports. In addition, industrial production in emerging Asia was supported by rising global demand for high-tech products, driven in part by the AI and electric vehicle sectors.”

  This report: “By contrast, growth in Asian economies stepped up somewhat in the second half of the year, bolstered by strong export activity in the high-tech sector associated with robust U.S. artificial intelligence and data center demand.”

Monetary policy

• The report now notes the FOMC lowered the policy rate by 100 basis points to 4-1/4 to 4-1/2 percent, a shift from the previous holding at 5-1/4 to 5-1/2 percent. Read the section
  Quotes

  Previous report: “The FOMC has maintained the target range for the federal funds rate at 5-1/4 to 5-1/2 percent since its July 2023 meeting.”

  This report: “the FOMC lowered the target range for the policy rate by a cumulative 100 basis points over its September, November, and December meetings”  ·  “bringing it to the current range of 4-1/4 to 4-1/2 percent.”

• The report now says the FOMC began reducing policy restraint due to greater confidence in inflation, replacing the earlier condition that cuts would wait for such confidence. Read the section
  Quotes

  Previous report: “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”

  This report: “The FOMC's decision to begin reducing the degree of policy restraint reflected the FOMC's greater confidence in inflation moving sustainably toward 2 percent and the judgment that it was appropriate to recalibrate the policy stance.”

• The report now states total balance sheet reduction is about $2 trillion, up from the previous $1.7 trillion, reflecting continued reductions since June 2024. Read the section
  Quotes

  Previous report: “Under this policy, the Federal Reserve has reduced its securities holdings about $1.7 trillion since the start of balance sheet reduction.”

  This report: “the Federal Reserve has reduced its securities holdings by $297 billion since June 2024, bringing the total reduction in securities holdings since the start of balance sheet reduction to about $2 trillion.”

• The report introduces a new special topic on the Federal Reserve's periodic review of its monetary policy framework, which was not mentioned in the previous report. Read the section
  Quotes

  This report: “The Federal Reserve has begun its periodic public review of the monetary policy framework it uses to pursue its dual-mandate goals of maximum employment and price stability.”

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