The Beige Book's anecdotal rundown of economic conditions won't be standing in the way of a September 18 FOMC rate cut, far from it as activity generally slowed from the prior report in July.

Nine of 12 districts reported flat or declining activity versus five in July at the same time that consumer spending in most districts"ticked down". Manufacturing declined in most districts as part of what two districts described as"ongoing contraction".

Residential construction and real estate activity were reported as mixed though home sales were mostly described as softer; reports on commercial construction and real estate were likewise uneven. Employment is described as"steady overall" with reports of layoffs remaining"rare". Inflation indications are favorable: wage growth"modest", increases for both inputs and selling prices"slight to moderate".

A cautious positive in the report is the overall business outlook with districts generally expecting activity to remain stable or improving"somewhat" in the coming months though three see slight declines ahead.

Today's report was prepared by the Cleveland Fed on information collected on or before August 26.

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.

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