Does the Beige Book Move Financial Markets?

About two weeks prior to each Federal Open Market Committee (FOMC) meeting, the Federal Reserve releases a description of economic activity in a document called the Beige Book. By creating a quantitative index of these qualitative reports, we examine whether the content of the Beige Book affects asset prices. The results indicate that more positive Beige Book reports on economic growth are associated with increases in interest rates, particularly intermediateand long-term rates, but not after controlling for several other macroeconomic indicators. The results are consistent with markets viewing the report as a summary indicator of economic growth but not of monetary policy moves in the near term.