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FOMC Minutes
Definition
On December 14, 2004,
the Federal Open Market Committee
announced that they would release
the minutes of each meeting with
a three week lag. This is a vast
improvement from the previous
release of the minutes which ranged
from a six to eight week lag.
While the FOMC releases a statement
after each meeting which describes
the policy action (or inaction),
the minutes generate a lot of
attention in the financial markets
because they reveal more details
on the discussion of the most
recent FOMC meeting.
Why Do Investors
Care?
The FOMC has changed
dramatically in the transparency
of its operations. It now discloses
policy changes at the end of each
meeting. Historically, the Fed
used to keep investors guessing
about policy changes. Historically,
Fed officials did not appear on
the speaking circuit as frequently
as they do now.
In today's environment,
where disclosure is more pronounced,
reading the minutes of the previous
month's meeting is not always
as enlightening as it used to
be. However, the minutes do include
the complete economic analysis
compiled by Fed officials and
whether or not any FOMC members
have voiced opinions at odds with
the rest of the group. Investors
who want a more detailed description
of Fed opinions will generally
read the minutes closely.
However, the Fed discloses
its official view at the end of
each FOMC meeting with a public
statement. Fed officials make
numerous speeches, which freely
give their views to the public
at large.
The FOMC meets eight
times a year in order to determine
the near-term direction of monetary
policy (interest rates).
CUP
Capacity Utilization Price
Capacity Utilization
measures the extent to which U.S.
manufacturing companies make use
of their installed productive
capacity (factories and machinery).
Capacity Utilization reflects
overall growth and demand in the
economy, rising when the economy
is vibrant, and falling when demand
softens.
High capacity utilization
also exerts inflationary pressures
as scarce resources are in higher
demand. However, it may also lead
to new capital investments, such
as new plants, that promote growth
in the future. Average Move since 2005
2005 30 pips before opening .
CPI assesses changes
in the cost of living by measuring
changes consumer pay for a set
of items. CPI serves as the headline
figure for inflation. Simply put,
inflation reflects a decline in
the purchasing power of the dollar,
where each dollar buys fewer goods
and services. In terms of measuring
inflation,
CPI is the most obvious
way to quantify changes in purchasing
power. The report tracks changes
in the price of a basket of goods
and services that a typical American
household might purchase.
An increase in the Consumer
Price Index indicates that it
takes more dollars to purchase
the same set basket of basic consumer
items.
ISM
Price Index
Reports on the economy
with a focus on manufacturing.
An index designed to predict the
direction of the economy.
The Institute
for Supply Management surveys
nearly 400 manufacturing firms
on employment, production, new
orders, supplier deliveries, and
inventories.A composite diffusion
index of national manufacturing
conditions is constructed, where
reading above (below) 50 percent
indicate an expanding (contracting)
factory sector
Non Farm Payrolls
Nonfarm payroll employment
offers a count of the number of
paid employees working part-time
or full-time in the nations business
and government establishments.Measures the number
of new jobs created in the previous
month, excluding the farming industry.
A rising trend has a
positive effect on the nation's
currency. The number of new jobs
being created is one of the most
important indicators of the economy's
health because consumer spending,
which is highly correlated with
labor conditions, makes up a large
portion of GDP.
This report is the first
of the month that relates to labor
conditions, making it susceptible
to big surprises.
New York Empire State
Price Summary
Survey assessing business
conditions and expectations of
manufacturing executives in New
York .
Though the survey is
relatively new and New York has
a considerably small number of
manufacturers, the report has
shown a promising correlation
to the Philadelphia Fed Index
and the market moving ISM Manufacturing
Survey.
Thus Empire serves as
a useful earlier indicator of
overall manufacturing in the US.
Results are calculated
as the difference between percentage
of positive and negative scores;
zero acts as the breakeven point.
A high figure is bullish
for the dollar, indicating positive
business sentiment conducive to
growth in production. A low or negative number
signals poor business conditions.
PPI - Core
The PPI is also
reported excluding food and energy;
two of its most volatile components.
These components are
particularly sensitive to temporary
economic factors like oil prices,
natural disasters and seasonal
affects.
Consequently, PPI excluding
Food and Energy provides a more
stable figure, but at the cost
of overlooking two significant
sectors in the economy (together
food and energy comprise nearly
a quarter of the goods included
in the PPI).
TIC
Report Summary
Summarizes the flow
of stocks, bonds, and money market
funds to and from the United States.
The headline figure
is the difference in value between
American purchases of foreign
securities and foreign purchases
of American securities, expressed
in millions of dollars. The Treasury
International Capital or TIC statement
is a major component of the American
capital account and gives valuable
insight into foreign demand for
American investments and dollar.
A positive figure indicates
that more capital is entering
the US than leaving as sales of
American securities to foreigners
exceed American purchases of foreign
securities. Such positive figures
suggest that American security
markets are competitive with those
of other countries. Foreign security
purchases are especially important
in the case of a trade deficit,
as a positive figure can offset
the depreciating effect of a trade
shortfall.
On the contrary, a negative
or declining TICS figure reflects
a declining capital flow picture.
Outflows are indicative of weaker
demand for US assets which puts
downward pressure on the value
of the dollar.
Employment Change
The net change in the
number of people employed in Canada
. Increases in employment are
generally accompanied by higher
consumption and expenditure levels.
At the same time, higher employment,
consumption and expenditures may
lead to heightened inflationary
pressures that encourage central
banks to tighten monetary policy.
If the Bank of Canada
were to raise interest rates,
it would put upward pressure on
the Canadian dollar.
Because this is the
main employment report in Canada
it tends to have significant impact
on the market. The headline figure
is the change in employment in
thousands.
New York Empire
State Price Summary
Survey assessing business
conditions and expectations of
manufacturing executives in New
York .
Though the survey is
relatively new and New York has
a considerably small number of
manufacturers, the report has
shown a promising correlation
to the Philadelphia Fed Index
and the market moving ISM Manufacturing
Survey.
Thus Empire serves as
a useful earlier indicator of
overall manufacturing in the US.
Results are calculated
as the difference between percentage
of positive and negative scores;
zero acts as the breakeven point.
A high figure is bullish
for the dollar, indicating positive
business sentiment conducive to
growth in production. A low or negative number
signals poor business conditions.
