More tea?

Beige Book reflects confidence in Fed's policy settings

A month ago I commented on the textual analysis of the Beige Book, and ECB Monetary Policy Report. Last week, the latest Beige Book was released, in advance of next week’s FOMC meeting. The Beige Book is important because it is the benchmark compendium of economic reports around the nation; a background for the impending FOMC discussion. Textual analysis of the latest report suggests a/ ‘inflation’ is not yet sufficiently subdued, and b/ reduced concern about a weakening economy than revealed in previous reports. The Beige Book is only one input to decision makers, but an important input. Overall, the latest release reflects confidence in current policy settings and little support for a change in policy direction.

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It will surprise no-one that ‘inflation’ remains a primary concern. Our analysis shows mention of the word ‘inflation’ in the Beige Book has fallen dramatically, but remains well above the levels that would signal an ‘all clear’ on price pressures - which on the following chart would equate to a score well below 2. This news, however, is not especially insightful. Most commentators have concluded something similar.

More interesting is a breakdown of value terms associated with ‘strength’ and ‘weakness’. The latest report suggests contributors to the Beige Book are considerably less concerned about ‘weakness’, while mentions of ‘strength’ are more or less unchanged. This is interesting because media have emphasised the continued strength of the US economy and employment, whereas textual analysis of the Beige Book suggests there is no strong emphasis on strength, rather a decline in concern for weakness.

I would also note that discussion of ‘war’, ‘conflict’, ‘Ukraine’, ‘oil’ and ‘energy’ show no unusual scores, after a spike in these scores in Q1 2022.