Highlights
The Fed's Beige Book shows little change from the prior report, although the tone of how Districts characterize activity sounds more downbeat. The report said,"Nine Districts reported either no change or only a slight change in activity this period while three indicated modest growth."
Growth in the labor market"moderated somewhat this period". The report also noted,"A small number of firms reported mass layoffs, and those were centered at a subset of the largest companies". As a result,"several Districts" saw an easing in labor market conditions. Also,"Additionally, firms benefited from better employee retention, which allowed them to hire for open roles while not constantly trying to back-fill positions". Upward wage pressures have moderated,"but remain elevated."
There are signs that inflation is improving."Overall price levels rose moderately during this reporting period, though the rate of price increases appeared to be slowing." The report said,"Contacts noted modest-to-sharp declines in the prices of nonlabor inputs and significantly lower freight costs in recent weeks". Producer prices are said to have risen"modestly" and at a"slightly slower pace". Consumer prices"generally increased due to still-elevated demand as well as higher inventory and labor costs." There is little sign that shelter costs are moderating."Prices for homes and rents leveled out in most Districts but remained at near record highs", the report said.
The report points to overall growth as leveling out in a way that will address the imbalances in the labor market and help bring inflation back towards the 2 percent target. It reflects the kind of"subpar" economic performance that FOMC participants have forecast as a consequence of more restrictive monetary policy. However, recent hard economic data have been such that Fed policymakers are likely to agree that one more rate hike of 25 basis points is needed before they pause.
Growth in the labor market"moderated somewhat this period". The report also noted,"A small number of firms reported mass layoffs, and those were centered at a subset of the largest companies". As a result,"several Districts" saw an easing in labor market conditions. Also,"Additionally, firms benefited from better employee retention, which allowed them to hire for open roles while not constantly trying to back-fill positions". Upward wage pressures have moderated,"but remain elevated."
There are signs that inflation is improving."Overall price levels rose moderately during this reporting period, though the rate of price increases appeared to be slowing." The report said,"Contacts noted modest-to-sharp declines in the prices of nonlabor inputs and significantly lower freight costs in recent weeks". Producer prices are said to have risen"modestly" and at a"slightly slower pace". Consumer prices"generally increased due to still-elevated demand as well as higher inventory and labor costs." There is little sign that shelter costs are moderating."Prices for homes and rents leveled out in most Districts but remained at near record highs", the report said.
The report points to overall growth as leveling out in a way that will address the imbalances in the labor market and help bring inflation back towards the 2 percent target. It reflects the kind of"subpar" economic performance that FOMC participants have forecast as a consequence of more restrictive monetary policy. However, recent hard economic data have been such that Fed policymakers are likely to agree that one more rate hike of 25 basis points is needed before they pause.
Definition
This book is produced roughly two weeks before the monetary policy meetings of the Federal Open Market Committee. On each occasion, a different Fed district bank compiles anecdotal evidence on economic conditions from each of the 12 Federal Reserve districts.
Description
This report on economic conditions is used at FOMC meetings, where the Fed sets interest rate policy. These meetings occur roughly every six weeks and are the single most influential event for the markets. Market participants speculate for weeks in advance about the possibility of an interest rate change that could be announced upon the end of these meetings. If the outcome is different from expectations, the impact on the markets can be dramatic and far-reaching.
If the Beige Book portrays an overheating economy or inflationary pressures, the Fed may be more inclined to raise interest rates in order to moderate the economic pace. Conversely, if the Beige Book portrays economic difficulties or recessionary conditions, the Fed may see the need to lower interest rates in order to stimulate activity. Since the past recession, traders worry about the impact of the Beige Book on the timing of tapering quantitative easing.
Since the Beige Book is released two weeks before each FOMC meeting, investors can see for themselves at least one of the many indicators which Fed officials will use to determine interest rate policy, and can position their portfolios accordingly.
Frequency
Eight times a year
If the Beige Book portrays an overheating economy or inflationary pressures, the Fed may be more inclined to raise interest rates in order to moderate the economic pace. Conversely, if the Beige Book portrays economic difficulties or recessionary conditions, the Fed may see the need to lower interest rates in order to stimulate activity. Since the past recession, traders worry about the impact of the Beige Book on the timing of tapering quantitative easing.
Since the Beige Book is released two weeks before each FOMC meeting, investors can see for themselves at least one of the many indicators which Fed officials will use to determine interest rate policy, and can position their portfolios accordingly.
Frequency
Eight times a year
