In addition to influencing interest rates through monetary policy, the Federal Reserve’s reports often have a critical impact on the market. Compared to raw data available in the market, these well-prepared reports not only provide credibility but also offer insights into the genuine views of scholars and experts on the economy. Let’s take a closer look at these reports produced by the Fed!

Federal Open Market Committee Statement

The FOMC holds eight meetings each year to discuss current economic conditions, set policies, and take actions aimed at achieving its Dual Mandate of economic stability. This should already be familiar to readers who have gone through our previous articles introducing the Fed. For those who haven't yet, you can refer to the link below for a quick guide to the Fed's structure and policy tools

The Federal Reserve System & Structure of the Fed

Federal Reserve Policies & Related Tools

After each meeting, the FOMC releases a “Policy Statement” on the Fed’s official website. While brief, this statement is highly significant for the market especially during periods of economic volatility, as it often has a substantial impact on financial markets.

The content, ranked by importance, can be divided into the following sections:

1. Interest Rate Decision This is the core of the statement, detailing the target range for the federal funds rate.
2. Economic Assessment Provides a brief overview of current economic conditions such as employment, prices, and inflation. The data mentioned in the statement often highlights key economic indicators the Fed will focus on in the near term, subtly indicating the Fed’s preferred market metrics.
3. Forward Guidance Combined with the economic assessment, this offers the basic reasoning of committee members, generally in a moderate tone. If uncertainties remain, the market often seeks additional clues from the Chair’s post-meeting press conference and the quarterly Summary of Economic Projections.
4. Voting Results As a reminder, the FOMC consists of 12 voting members. Based on their views on inflation, members may be divided into hawks (favoring tightening) and doves (favoring easing). If there are disagreements, the final vote may not be unanimous. In such cases, dissenting votes become a focal point for the market and provide valuable insights for investors.
5. Inflation and Employment Targets The statement consistently mentions goals of stable employment and a long-term 2% inflation target. This reflects the Fed’s ongoing policy objectives. Any shift in these targets indicates a clear change in the Fed’s policy stance, which could have a significant impact on the market.

FOMC Meeting Minutes

Unlike the concise and straightforward FOMC statement, the FOMC Meeting Minutes summarize the opinions expressed by all participants during the meeting, organized into a detailed document. These minutes are released three weeks after each FOMC meeting.

The content is highly diverse. In addition to discussions on various nationwide macroeconomic indicators such as employment, inflation, and financial system data relevant to monetary policy, the minutes occasionally include analyses of how international developments might specifically impact the U.S. economy. They provide detailed economic situation analyses, trends, and potential risks. Moreover, the document records dissenting opinions among participants, along with detailed explanations for these differing views. While lengthier than the statement, the minutes can be considered a concise yet comprehensive report on the U.S. macroeconomic landscape.

Since FOMC meetings invite all Federal Reserve Bank presidents (for those unfamiliar, you can review The Federal Reserve System & Structure of the Fed ), the minutes also shed light on the developments and risks faced by different regions.

It is worth noting that the opinions expressed are not attributed to specific individuals, making it challenging to trace who said what. Additionally, with a three-week lag from the meeting date, the information may lack real-time relevance. However, the minutes remain an essential read for investors aiming to interpret the Federal Reserve's stance.

Summary of Economic Projections (SEP)

The Summary of Economic Projections (SEP) is released quarterly in March, June, September, and December, providing insights into FOMC participants' outlooks on the economy. The data is presented using the "median" and "range" methods, allowing investors to gauge the degree of consensus or divergence among participants. The projections are also compared to those from previous reports.

This report can be broken down into key sections, which are closely watched by market participants:

1. Real GDP Growth Rate Projections These projections reflect the FOMC participants' expectations for U.S. economic growth, offering a clear indicator of their views on the future trajectory of the economy.
2. Unemployment Rate Projections As employment drives demand, which in turn stimulates the economy, the unemployment rate serves as a long-term indicator of labor market health and the current position in the business cycle.
3. Inflation Rate Projections Inflation expectations are typically based on the Personal Consumption Expenditures (PCE) Price Index, which represents the general price level and is a key metric for monetary policy considerations.
4. Interest Rate Projections – Dot Plot The dot plot showcases FOMC participants' expectations for future interest rate trends. It is highly significant to the market, not only hinting at the direction of interest rate policy but also reflecting the perspectives of both voting and non-voting members on economic conditions. The dot plot can be seen as a synthesis of the other projections.

Overall, the SEP acts as an anchor point for the market and provides a shared framework for discussion and focus. It has considerable influence on market volatility and investor expectations.

Beige Book

The full name of the Beige Book is "Summary of Commentary on Current Economic Conditions by Federal Reserve District." Similar to the SEP, it is published regularly, with eight reports released annually. Each Beige Book is prepared before an FOMC meeting and serves as a reference document for the discussion.

As the name suggests, the Beige Book focuses on summarizing economic conditions across the Federal Reserve's districts. Its content can be broken down into three key parts:

1. General Items These include summaries of regional economic conditions, labor market updates, prices, consumer spending, manufacturing, and construction activities. These are standardized categories reported across all districts.
2. Regional-Specific Insights These highlight industry-specific conditions based on the economic characteristics of each district. For example:
   • The Boston Fed reports on the IT and software services industry.
   • The New York Fed focuses on banking and finance.
   • The Atlanta Fed examines the transportation sector. Although industries may overlap across districts, each district provides unique perspectives and insights, offering investors a more nuanced understanding of the regional economic landscape.
3. Anecdotal Evidence Rather than relying heavily on statistical data, the Beige Book often incorporates qualitative insights from regional Fed presidents and local experts. While these observations may lack statistical support, they offer valuable qualitative perspectives for market participants to consider.

Federal Reserve Bulletin

The Federal Reserve Bulletin, published by the Board of Governors, historically covered a wide range of in-depth economic topics, including:

• Analyses and insights on monetary policy.
• Statistical releases.
• Studies on interest rates, labor markets, and financial stability.
• Reports on the regulation and oversight of financial institutions.

However, the Bulletin was discontinued in 2022. Its content has since been divided into specialized reports, available under distinct categories on the Federal Reserve’s official website.

For those interested, the official Federal Reserve website remains an excellent resource for accessing these documents. Fed Official Website

Senior Loan Officer Opinion Survey (SLOOS)

The Senior Loan Officer Opinion Survey (SLOOS) conducted by the Federal Reserve samples 80 large domestic banks and 24 foreign banking institutions, further categorized by size into large, medium, and small banks. The survey focuses on lending and borrowing standards, corporate and household loan demand across states, and the pressures arising from current interest rate levels. Additionally, the Fed includes one to two ad hoc questions based on current economic conditions.

SLOOS is regarded as a crucial source of information on bank lending conditions and overall credit availability. It is published quarterly, typically in January, April, July, and October.

Key sections of the report include:

1. Lending to Businesses
   • Commercial and Industrial Loans (C&I): Provides insights into lending standards and activity for businesses.
   • Commercial Real Estate Loans (CRE): Details the conditions and standards for real estate lending to enterprises.
   • Special Questions: Addresses specific issues pertinent to the current economic climate. This section highlights the supply side of credit and helps investors assess corporate funding needs and pinpoint the stage of the business cycle.
2. Lending to Households
   • Residential Real Estate Loans: Covers lending standards and activity in the housing market.
   • Consumer Loans: Focuses on credit card and other personal lending. By analyzing demand-side data, this section sheds light on the strength or weakness of aggregate demand, influencing FOMC interest rate decisions. For the market, this report is as significant as retail sales or other demand-side metrics.
3. Tables and Attachments In addition to textual descriptions, the report includes:
   • Weighted survey results with banks categorized by loan types and response percentages.
   • PDFs of raw survey data and polished charts, providing a visually clear presentation. These features make the report both accessible and comprehensive.

Additional data, such as high-risk loan pricing, default reserves, and changes in competitive dynamics among financial institutions, are also covered in the report. These details are invaluable for readers seeking a deeper understanding of credit market dynamics.

Balance Sheet (H.4.1)

The Federal Reserve provides weekly updates on its balance sheet, known as the H.4.1 Release, available on its official website. Similar to the balance sheet of Taiwan's central bank, this report links directly to the financial system and is updated every Wednesday, offering highly timely data.

Like standard financial statements, the Federal Reserve System's balance sheet comprises three main components: Assets, Liabilities, and Equity.

1. Assets
   • U.S. Treasury Securities: Held primarily due to open market operations (OMOs) and large-scale purchases during quantitative easing (QE), making up a significant portion of assets.
   • Mortgage-Backed Securities (MBS): Similarly acquired during QE programs, reflecting the Fed's support for housing markets.
   • Loans to Depository Institutions: Includes funds provided via the discount window and programs like the Bank Term Funding Program (BTFP), introduced during crises like the SVB event. These loans are collateralized by the borrowing institutions' assets.
2. Liabilities
   • Currency in Circulation: Represents the total physical currency currently circulating in the economy.
   • Reserves of Depository Institutions: Funds held by banks at the Fed as reserves.
   • Overnight Reverse Repurchase Agreements (ON RRP): A tool for managing short-term liquidity counted as a liability.
3. Equity
   • Includes stock held by member banks and retained earnings, potentially including dividend payouts.

Key Applications and Insights

The balance sheet serves as a window into the Federal Reserve's monetary operations and the health of the banking system. For example:

During the SVB crisis, the Federal Reserve urgently introduced the Bank Term Funding Program (BTFP). Due to its relatively favorable and flexible financing terms, financially strained depository institutions promptly turned to the Federal Reserve for funding. As a result of this substitution effect, the BTFP replaced the discount window to become the primary source of financing.

By combining the H.4.1 data with these reports, investors can better assess the overall health and stability of the financial system.

Assets and Liabilities of Commercial Banks in the United States (H.8)

In addition to the balance sheet, those seeking to better understand consumer purchasing habits and the strength of demand can refer to the assets and liabilities of commercial banks across the U.S.

The Federal Reserve provides a webpage detailing the assets of commercial banks (primarily loans, followed by securities holdings) and their liabilities (primarily deposits).

The lending data provides detailed statistics on the growth and changes across different types of loans, even more comprehensively than the SLOOS survey. By observing changes in lending volumes, especially during economic booms, we can understand consumer purchasing patterns and detect significant trends.

Furthermore, it is particularly valuable to examine the deposit and lending situation of commercial banks during times of financial system crises. Here's an example:

For instance, if we look at the changes in March 2023, following the collapse of SVB, public panic led to bank runs. Coupled with high overnight lending rates at the time, many banks faced liquidity issues and thus raised significant market concerns. Fortunately, the Federal Reserve implemented the BTFP program, which stabilized overall financial health. These detailed data on the assets and liabilities of commercial banks are all discernible in this report.