How to Interpret Fed-speak

How to Interpret Fed-speak

Summary:The Beige Book is a great resource for investors looking for macro themes and insight into the Fed’s anecdotal inputs.The Fed has discussed implementing a “caps” strategy in order to reduce securities holdings.Short term traders might also be interested in the Fed Minutes for a specific trading opportunity.Everyone knows the Fed is data dependent, it’s a famous phrase used in all of their statements. “The actual path of the federal funds rate will depend on the economic outlook as informed by incoming data,” as the Fed put it in their latest release1. But what should investors exactly look at when deciphering the Fed?Just like how technical traders base their decisions off a particular oscillator or how a fundamental investor gets an edge by following a particular section of an earnings release, the Federal Open Market Committee (FOMC) and market participants alike, digest numerous data points and anecdotes to paint a mosaic of the US economy and craft policy accordingly. Generally speaking, this comes from the 12 FOMC members, which is structured as follows: seven board governors, the President of the Federal Reserve Bank of New York, and four other reserve bank presidents. All FOMC members present their case on economic conditions. Moreover, non-voting reserve bank presidents also voice their opinion. Some of the variables these officials take into consideration can be found in two key releases.Many investors are already aware of these releases, but glance over them. Just about any economic calendar has these events highlighted, but lack mainstream in-depth following. The content of these reports doesn’t always move the market as much as an FOMC Meeting Announcement, energy...