Fed

What it Measures:

A summary of 12 Federal Reserve district reports is commonly-known as the Fed’s Beige Book, or more formally as The Summary of Commentary on Current Economic Conditions. This influential Book is prepared by one of the Federal Reserve Banks given the task on a rotating basis.

Basically, the twelve regional Reserve Banks of the Federal Reserve System compile “anecdotal” information of economic conditions in each of the twelve Federal Reserve regions. Each Reserve bank obtains information for the Beige Book through reports from other major banks and their branch directors as well as from interviews with economists, market experts and key business contacts and summarizes the information by District and sector.

What effect it has:

The Fed’s Beige Book report typically affects the market by expressing the general tone of the Federal Reserve towards interest rates and prevailing economic conditions.

If the Book’s overall tone is interpreted by the market as more hawkish-than-expected, thereby indicating a tendency for the Fed to raise interest rates, this usually has a positive effect on the U.S. Dollar relative to other currencies.

How often it is released:

The Fed’s Beige Book is released eight times a year, two Wednesdays before the meeting of the FOMC in that given month. Beige Books are therefore released in January, March, April, June, July, September, October and December.

Why it is important:

The Fed’s Beige Book represents the assessment of the Federal Reserve of the economic conditions of each of its 12 districts. The economic factors it examines on a local level directly impacts the Federal Reserve’s decisions on interest rates which is extremely important to the economic prospects of the nation.

In essence, this publicly-available book is relied upon by the Federal Open Market Committee or FOMC to make decisions on monetary policy, although the FOMC also uses two other books that are not released to the public. These are the Fed’s Blue and Green Books that are considered even more influential on the Fed’s interest rate decisions.