thrift institutions, for many years the calculation of local deposit and market share data has also included a weighted consideration of their account deposits. 4 in 1995, to “ speed [ the ] competitive review [ process ] and reduce regulatory burden on the banking industry ” the department of justice and the federal banking agencies developed several initial “ screens ” to identify mergers that would not have adverse effects on competition and would therefore not require significant review. 5 these screens were part of a broader set of competitive review guidelines that also presented additional information that could be considered in the analysis of a merger transaction. the initial screens are based on deposit market share using the herfindahlhirschman index, or hhi. under this scale, a perfect monopoly would report an hhi of federal deposit insurance corporation ( fdic ), bank call report information — summary of deposits, https : / / www. fdic. gov / resources / bankers / call - reports / call - summary - of - deposits. html. see, e. g., first hawaiian, inc., 77 federal reserve bulletin 52 ( 1991 ) ; midwest financial group, 75 federal reserve bulletin 386 ( 1989 ) ; national city corporation, 70 federal reserve bulletin 743 ( 1984 ). see u. s. department of justice, bank merger competitive review — introduction and overview ( 1995 ), https : / / www. justice. gov / atr / bank - merger - competitive - review - introduction - and - overview - 1995. - 610, 000, while a perfectly competitive market would be close to zero. under these screens, any merger that does not result in the hhi exceeding 1, 800, post - merger, or increases the market hhi by less than 200, would likely not require further review. of note, some argue that these guidelines are uniquely strict because the 1, 800 hhi level for banking is lower than the 2, 500 level set in the horizontal merger guidelines used to evaluate transactions in other industries. in this context, evaluating how a decline in bank charters and bank branches affects how we understand competition is a simple math problem : as banks merge or close branches in a market, the market becomes more concentrated and the hhi increases. in fact, more than 60 percent of the currently defined geographic banking markets in the united states are above the 1, 800 threshold. to some, these data are evidence that the marketplace for banking products and services is increasingly anticompetitive, warranting tougher scrutiny of mergers

one indication that inflation risks were rising would be a tendency for labor markets to tighten further. but the fomc also needs to continue to assess whether the existing degree of pressure in these markets is consistent with sustaining our low - inflation environment. if new data suggest it is likely that the pace of cost and price increases will be picking up, the federal reserve will have to act promptly and forcefully so as to preclude imbalances from arising that would only require a more disruptive adjustment later – one that could impair the expansion and bring into question whether the many gains already made can be sustained. recent developments a number of important forces have been shaping recent developments in the u. s. economy. one has been a recovery of financial markets from the disruptions of last fall. by the end of 1998, the extreme withdrawal from risk - taking and consequent seizing - up of markets had largely dissipated. this year, risk spreads have narrowed further – though generally not to the unrealistically low levels of a year ago – and a heavy volume of issuance in credit markets has signaled a return to their more - normal functioning. equity prices have risen to new highs and, in the process, have elevated price - earnings ratios to historic levels. abroad, many financial markets and economies also have improved. brazil weathered a depreciation of its currency with limited fallout on its neighbors. in asia, a number of the emerging market economies seemed to be reviving after the trying adjustments of the previous year or so. progress has not been universal, and in many economies prospects remain clouded, depending importantly on the persistence of efforts to make fundamental reforms whose necessity had been made so painfully obvious in the crises those economies endured. nonetheless, the risks of further major disruptions to financial and trade flows that had concerned the fomc when it eased policy last fall have clearly diminished. improving global prospects also mean that the u. s. economy will no longer be experiencing declines in basic commodity and import prices that held down inflation in recent years. in the domestic economy, data becoming available this year have tended to confirm that productivity growth has stepped up. it is this acceleration of productivity over recent years that has explained much of the surprising combination of a slowing in inflation and sustained rapid real growth. increased labor productivity has directly limited the rise of unit labor costs and accordingly damped pressures on prices. this good inflation performance, reinforced also by falling import prices, in turn has fostered further declines in inflation expectations over