A Closer Look at the Fed’s Beige Book

(eToro Blog) While the Federal Reserve’s regular rate setting and monetary policy announcements are exceedingly scrutinized by analysts and market players alike, one less familiar Fed output has no less impact on the economy. The Fed’s Summary of Commentary on Current Economic Conditions, familiarly known as the Beige Book, is viewed as critical tool to get a glimpse into the “thinking” of the world’s most influential central bank.

The Beige Book is published and released eight times a year; in essence it is a compilation of reports and economic observations from each of the governors of the twelve Federal Reserve branches. It also includes a synopsis of interviews with economists, key business contacts and market experts, among others, from each of the Fed districts.

The report is published about two weeks ahead of the Fed’s regularly scheduled FOMC meeting; the Federal Open Market Committee is the Fed’s rating setting and monetary policy committee, and it is comprised of twelve members, seven who are members of the Fed board and five chosen on a rotating basis from among the Fed’s branch presidents so that all regions are represented.

All Fed officials receive a copy of the Beige Book as well as other key data (the “blue book,” which is staff analysis of policy alternatives, and the “green book,” which contains staff forecasts) which are not offered for public consumption. Combined, the data helps the FOMC members make an informed decision for the next FOMC meeting.

Say for example the Beige Book’s data reveals a prevalent inflationary trend among the districts that may compel the voting members of the FOMC to consider an interest rate hike. Likewise, a number of recessionary indicators across the various districts may give rise to discussions of possible stimulus measures.

Later today, at 6:00 p.m. (GMT), the Fed will be releasing its latest Beige Book, and market players are already speculating on what it will or won’t contain. Traders will be able to use the Beige Book to finesse their trading strategy as they attempt to determine their own economic outlook given the Fed’s views.

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