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The prospect of additional fiscal stimulus likely contributed to a steeper U. S. Treasury yield curve, increased inflation compensation, and broad dollar depreciation. | 2,012 | 1 |
In the Committee's discussion of current and prospective economic developments, members commented that the statistical and anecdotal information that had become available since the October meeting continued to point to robust growth in overall economic activity, despite some indications of softening in interest-sensitive sectors of the economy. | 1,997 | 1 |
The persistence of underutilized resources was expected to foster some moderation in core price inflation. | 2,013 | 2 |
In their review of the outlook for prices, members noted that incoming data over the intermeeting period had shown a slowing in core inflation from the high levels posted earlier in the year, consistent with the Committee's view that a portion of the earlier increase had reflected transitory factors. | 2,020 | 2 |
Although some decline in inflation could not be ruled out, persistence of the current degree of tightness in labor markets, consistent with the economy growing at a pace near its potential, could at some point begin to put more pressure on costs and prices, and growth somewhat above potential, which some members saw as a distinct possibility, would be even more likely to produce that result. | 2,015 | 1 |
Consumer food prices were little changed in August. | 2,006 | 2 |
Thus, reducing vacancies from an extremely high level to a lower (but still strong) level has a relatively limited effect on hiring and on unemployment. | 2,003 | 2 |
This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. " | 2,015 | 2 |
These arguments imply that slack in labor markets remains considerable and therefore that a reduction in the unemployment rate toward its longer-run normal level would not have much effect on inflation. | 2,020 | 0 |
The members viewed the outlook for core price inflation as still quite benign, largely reflecting the ample availability of labor and other producer resources to accommodate rising economic activity and the favorable prospects for further robust growth in productivity. | 2,012 | 2 |
The idea is that providing more information about the Committee's views of the economic outlook may allow financial market prices to reflect more accurately the likely future stance of monetary policy. | 1,997 | 2 |
These geopolitical events also pose downside risks to growth. | 2,001 | 0 |
Even with the improving labor market, I still hear from businesses that qualified workers are difficult to find, and labor shortages remain a drag on hiring and on economic growth. | 1,996 | 0 |
Ultimately inflation is determined by the policy actions of the central bank. | 2,000 | 2 |
This is a tangible recent example of the need both to judge how the equilibrium real interest rate that is relevant for policy might have changed from a perceived long-run level and to set policy against the background of such an understanding. | 2,003 | 2 |
The implication is that trend productivity and, ultimately, potential growth are lower than expected. | 2,004 | 0 |
To be sure, our main tool, monetary policy, is a blunt instrument that cannot be targeted at individual industries or regions. | 2,022 | 2 |
However, it was noted that the Committee had in place tools that would enable it to remove policy accommodation quickly if necessary to avoid an undesirable increase in inflation. | 2,006 | 1 |
But also we want to see inflation move up back to our 2 percent objective over the medium term, and so seeing above-trend growth and continuing tightness—greater tightness in labor and product markets—I think that will help us achieve our objective as well with respect to inflation. | 2,018 | 0 |
This policy preference was based on expectations of growth in business activity at a pace averaging in the vicinity of the economy's potential, a perception among the members that the risks to such an outlook were more balanced than earlier, and anticipations that under these circumstances inflation would remain constrained. | 2,004 | 2 |
So, up until the first week of October 2021, the story of high inflation being temporary was holding up, and the labor market improvements had slowed but were continuing. | 2,022 | 2 |
Monetary Policy With that outlook in mind, let me turn to monetary policy. | 2,021 | 2 |
In the view of a number of members, rapid growth of the monetary aggregates, though it had slowed very recently, was a further indication that financial conditions were not restraining economic activity. | 1,996 | 1 |
Labor market conditions had improved further, with solid job gains and a lower unemployment rate; taken as a whole, labor market indicators suggested that the underutilization of labor resources was continuing to diminish. | 2,005 | 1 |
As a policymaker, I'd like to think that well-executed monetary and fiscal policies--each focused importantly on their respective long-run goals--played some role in creating economic conditions that fostered noninflationary economic growth. | 2,004 | 2 |
Inflation has been running somewhat below the Committee's longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. | 2,016 | 0 |
For example, given the starting point for the outlook, the forecasts will trace out a path for the economy to preserve or reestablish maximum employment and price stability that will reflect FOMC participants' views of the relative variation in output and inflation that is possible in the short run. | 2,004 | 2 |
The labor market improved in August, and the unemployment rate edged down to 5. | 2,008 | 1 |
While participants viewed the downside risks to their forecasts of economic activity over the projection period as having diminished, their assessment of the most likely outcomes for economic activity and inflation over the projection period was not greatly changed. | 2,004 | 2 |
Overall, research indicates that trade with developing economies in particular has slowed the rate of growth of import prices faced by industrialized countries, with estimates of the reduction ranging widely from 1/2 to 2 percentage points. | 2,007 | 2 |
What I do want to share with you is how the equity market fits into my thinking about monetary policy. | 2,000 | 2 |
The staff viewed the extent of uncertainty around its June projections for real GDP growth and the unemployment rate as roughly in line with the average over the past 20 years. | 1,997 | 2 |
An easing of supply constraints was expected to support continued gains in economic activity and employment as well as a reduction in inflation. | 2,017 | 2 |
Any such rise in inflation expectations and associated upward pressure on inflation itself would likely prove costly to reverse. | 2,015 | 1 |
The staff also reduced slightly its forecast of growth next year but continued to anticipate a moderate strengthening of the expansion in 2011 as well as a further pickup in economic growth in 2012. | 2,000 | 1 |
The ultimate responsibility for price stability rests with the Federal Reserve. | 2,021 | 2 |
These authors point out (as have many others) that, when nominal interest rates are at or near zero, the central bank can lower the real rate of interest only by creating expectations of inflation on the part of the public. | 2,003 | 2 |
Nonetheless, the reported rise in employment of temporary workers in recent months could presage a broader increase in job growth and thus was a welcome development. | 2,021 | 1 |
However, economic activity continued to be depressed in areas affected by the downturn in the energy sector and falling agricultural commodity prices, although several participants noted that the recent firming in crude oil prices had led to a modest increase in drilling activity. | 1,998 | 2 |
Despite the uncertainties, the consensus estimates of the NAIRU and the growth of potential give us a hint about what type of landing we should be aiming for and which of the scenarios depicted in figure 1 best describe the economy's initial conditions and prospects. | 1,999 | 2 |
My impression is that most investors agree that the change is an improvement in openness and transparency of monetary policy. | 2,021 | 2 |
Among other questions that could be addressed would be how policy actions (as opposed to inflation outcomes) influence expectations and how sensitive Federal Reserve credibility is to short-run departures from low inflation. | 1,997 | 2 |
The combination of a commitment to condition liftoff on the sustained achievement of our employment and inflation objectives with yield curve caps targeted at the same horizon has the potential to work well in many circumstances. | 2,005 | 2 |
Broad equity price indexes decreased slightly, on net, as substantial early gains arising from investors' improved perceptions about the inflation outlook and better-than-feared second-quarter earnings were more than offset by later losses arising from expectations that the Committee would follow a more restrictive policy than previously expected. | 2,011 | 1 |
Looking ahead, the anticipated pickup in employment and related gains in incomes, undergirded by continued robust growth in structural productivity, was seen as supporting further expansion in consumer spending. | 2,004 | 1 |
Participants discussed several risks that, if realized, could necessitate a steeper path of increases in the target range; these risks included the possibility that inflation pressures could build unduly if output expanded well beyond its maximum sustainable level, perhaps owing to fiscal stimulus or accommodative financial market conditions. | 1,998 | 1 |
Balance Sheet Policies and Reserve Demand Taking stock, I note that one approach to the constraints on policy imposed by the current low level of interest rates is to make what were previously unconventional tools—balance sheet policies and forward guidance—as conventional as possible. | 2,007 | 2 |
Depository institutions continued to bid aggressively for 28-day funds at the Term Auction Facility (TAF) during the intermeeting period, and demand for funds was strong at both of the 84-day TAF auctions. | 1,999 | 0 |
This increase was slower than a year earlier, as core PCE price inflation (which excludes changes in consumer food and energy prices) moved down to 1. | 2,004 | 0 |
Projections of the rate of inflation, as measured by the consumer price index, had a central tendency of 1-3/4 to 2-1/4 percent, on the high side of the outcome for 1997 when the rise in the index was held down by damped increases in food prices and declines in energy prices. | 2,005 | 2 |
During the first stage, the inflation rate would exceed the long-term desired inflation rate, as the price-level gap was eliminated and the effects of previous deflation undone. | 2,000 | 1 |
That is why foreign trade deficits are typically thought of as self-correcting. | 2,002 | 2 |
That's why I said that flexibility is also an important characteristic of monetary policy during a time of financial turmoil. | 2,005 | 0 |
Data received over the intermeeting period reinforced earlier indications that real GDP growth had turned up after having been slow in the first quarter of this year. | 2,016 | 2 |
Were we to introduce an interest rate rule, how would we judge the meaning of a rule that posits a rate far above or below the current rate? | 2,003 | 2 |
Some members observed that while slower growth in consumer spending was the most probable forecast, they saw an upside risk from the wealth effects of the large rise that had occurred in the value of stock market holdings. | 2,013 | 2 |
So tonight, I would like to take a few minutes to put this action in the broad context of the Fed’s mandate to promote the stable financial environment that will encourage economic growth. | 2,020 | 1 |
And then, what the statement emphasizes, and this is the same language we used in December and January, we used the language especially if inflation is running below our 2 percent objective. | 2,017 | 0 |
Increases in the prices of energy, other commodities, and non-oil imports, as well as reports from some business contacts that higher costs were increasingly being passed through to prices, suggested that the downtrend in inflation had ended. | 2,008 | 1 |
With gross retail margins amounting to about 30 percent of sales, a reduction in currently elevated margins could make an important contribution to reduced inflation pressures in consumer goods. | 2,000 | 1 |
Some have been concerned that the Federal Reserve and the Treasury might be working at cross purposes today to the extent that reductions in the Treasury debt supply have lead to declines in longer-term Treasury rates at a time when monetary policy is aiming to slow the pace of economic activity to a more sustainable rate. | 2,017 | 1 |
I mean, it really depends on how long it takes for wages and, more than that, prices to come down for inflation to come down. | 2,019 | 1 |
When considering the risks to the labor market, these risks must be viewed in the context of its current strength and with the understanding that our primary challenge is to get inflation under control. | 2,007 | 1 |
This supports the view that there has been an increase in trend productivity growth. | 1,999 | 0 |
The challenge is to set a strategy that respects this uncertainty, takes advantages of opportunities for better performance, while mitigating the risks of overtaxing the limits of sustainable production and growth. | 2,005 | 2 |
The risks to the forecast for real GDP were seen as tilted to the downside, reflecting the staff's assessment that monetary policy appeared to be better positioned to offset large positive shocks than substantial adverse ones. | 1,997 | 0 |
Jorgenson, Ho, and Stiroh use a similar methodology and find a range from a little less than 1-1/2 percent to about 3 percent with a central tendency of around 2-1/4 percent.5 These estimates are clearly plausible, but history does raise some warning flags concerning the length of time that productivity growth continues elevated. | 2,004 | 0 |
Not surprisingly, the projected path of above-trend GDP growth in 2021 and 2022 translates into rapid declines in the projected path for the unemployment rate, which is projected to fall to 3.8 percent by the end of 2022 and 3.5 percent by the end of 2023. | 2,003 | 1 |
Factors pointing to potentially higher inflation included increased pressures on food prices stemming from disappointing harvests in some areas and relatively low grain supplies. | 2,014 | 1 |
Central banks have adopted price stability as a key long-term objective, and they have become more transparent and systematic in their operations. | 1,997 | 1 |
A few participants also noted that uncertainty about the extent of resource slack in the economy was considerable and that it was quite possible that the economy could soon be operating close to potential, particularly if labor force participation rates did not turn up much while employment continued to register gains. | 1,996 | 2 |
Central bank actions are designed in the first instance to influence asset prices and yields, which in turn affect economic decisions and thus the evolution of the economy. | 1,997 | 2 |
Weaker demand and significantly lower oil prices are holding down consumer price inflation. | 2,015 | 0 |
Another factor that has contributed to the swing toward current-account surplus among the non-industrialized nations in the past few years is the sharp rise in oil prices. | 2,006 | 1 |
Indeed, CPI inflation does appear to have become more sensitive to import prices over time, both in the United States and in other OECD countries (Pain, Koske, and Sollie, 2006).3 Can domestic monetary policy still control domestic interest rates and so stabilize both inflation and output? | 2,019 | 2 |
The household saving rate, which had already risen considerably, would eventually level out and cease to hold back consumption growth. | 2,000 | 2 |
However, if incoming information indicates faster progress toward the Committee's employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated. | 2,007 | 1 |
Some members nonetheless referred to indications of increasing expenditures for various categories of high-tech equipment and software, and they noted that impetus to demand from a positive outcome in the war against Iraq should have a favorable effect on business capital spending, especially if it were accompanied by a rally in the stock market. | 2,013 | 2 |
More broadly, signs of a pickup in growth in economic activity in some AFEs and emerging Asian economies other than China also appeared to contribute to the improvement in sentiment in financial markets. | 2,018 | 2 |
In the residential real estate sector, home sales and construction had increased from very low levels, and house prices appeared to be stabilizing. | 2,009 | 2 |
Beyond 2017, the forecast for real GDP growth was little revised. | 2,018 | 2 |
The rationale for monetary policy tightening is, in my judgment, quite straightforward and flows from two assessments about the current state of the economy. | 2,007 | 1 |
But some would argue that monetary policy is actually further away from neutral, based on the fact that current inflation is so much higher than the federal funds rate. | 1,997 | 1 |
As U.S. business investment has recently begun a cyclical recovery while residential investment has remained strong, the domestic saving shortfall has continued to widen, implying a rise in the current account deficit and increasing dependence of the United States on capital inflows.9 According to the story I have sketched thus far, events outside U.S. borders--such as the financial crises that induced emerging-market countries to switch from being international borrowers to international lenders--have played an important role in the evolution of the U.S. current account deficit, with transmission occurring primarily through endogenous changes in equity values, house prices, real interest rates, and the exchange value of the dollar. | 2,022 | 1 |
This evaluation assumed continued sluggish growth in final demand during the period immediately ahead. | 2,004 | 2 |
The Federal Reserve and ECB Framework Reviews The monetary policy framework reviews conducted by the Federal Reserve and the ECB provide another example of monetary policy correlation. | 2,007 | 2 |
Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed. | 2,020 | 2 |
They also generally expected that further gradual increases in the target range for the federal funds rate would be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term. | 2,017 | 1 |
Some occasions call for significant swings in currency or reserves because of seasonal demands for cash and loans. | 2,017 | 2 |
Job gains had been robust in recent months, and the unemployment rate had declined substantially. | 2,021 | 1 |
As always, my colleagues on the FOMC and I will act to foster our dual objectives of price stability and sustainable economic growth. | 2,022 | 1 |
In this less comfortable world, restoring price stability can involve a painful process of slow growth and elevated unemployment. | 2,019 | 1 |
Consumer price inflation remained subdued in November, with both the overall index and the index excluding food and energy items rising at the same relatively low rates as in October. | 2,012 | 0 |
In light of the robust expansion of capital spending thus far this year, the outlook for business investment spending was revised up appreciably, as more of the strength over the latter part of 2004 was attributed to underlying demand and less to the effects of the partial-expensing tax provision. | 2,004 | 1 |
After deteriorating further early in the period, foreign equity prices bounced back and credit spreads on emerging market bonds narrowed, in both cases returning to December levels in most countries. | 2,015 | 2 |
But before I return to the prospects for 1998 and the challenges for monetary policy, I will offer a retrospective on 1997. | 2,021 | 2 |
Risk sentiment abroad fluctuated over the intermeeting period as market participants weighed increasing coronavirus cases in a number of countries against improving economic data releases and ongoing fiscal and monetary policy support. | 2,010 | 2 |
Remarkably, 30-year Treasury yields were only slightly lower than 10-year yields throughout the episode, implying that the markets had no confidence that inflation would ever return to 1950s or 1960s levels. | 2,004 | 0 |
An upside risk was that inflation could increase more than expected in an economy that was projected to move further above its potential. | 2,002 | 1 |
Several saw that outlook as depending importantly on continued strengthening of the labor market or on an above-trend pace of economic activity. | 2,014 | 2 |
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