The US Federal Reserve will release the first Beige Book of 2026 at 3:00 AM this Thursday, January 12. This release comes roughly a month and a half after the previous report on November 26, 2025, and will shed light on the macroeconomic changes across the various Federal Reserve districts during this period.
The Beige Book is published eight times a year, with its content primarily derived from interviews with contacts across various sectors, such as business leaders, economists, and market experts. The twelve regional Federal Reserve Banks compile these interviews and report the findings to the Fed. The structure of the Beige Book is relatively standardized, and observers often analyze changes in the wording of the latest report to gauge the US economy. For instance, the previous Beige Book noted that economic activity had changed little since the last report, with two districts reporting modest declines and one district reporting moderate growth. If the Beige Book released this week shows an increase in the number of districts reporting economic declines and a decrease in those reporting growth, it could be concluded that the US macroeconomy continues to exhibit weakness. The Beige Book also includes specific analyses of the labor market and inflation rate. The previous report mentioned that employment had declined slightly, with labor demand weakening in about half of the districts, while prices rose at a modest pace. This combination of weak employment and rising prices supports the case for the Fed to continue its interest rate cutting policy. Should the language concerning the labor market and inflation in this week's Beige Book change, the probability of Fed rate cuts will also shift. For example, if price levels show an increase, the Fed's willingness to continue cutting rates would likely diminish, as lower interest rates could exacerbate high inflation.
The US Bureau of Labor Statistics will release the US unadjusted Consumer Price Index (CPI) year-over-year data for December at 21:30 this Tuesday. This is the first standalone monthly price data unaffected by the government shutdown, giving it significant guiding significance. The previous reading for the December unadjusted CPI year-over-year was 2.7%, with the forecast holding steady. The previous reading for the unadjusted core CPI year-over-year was 2.6%, with a forecast of 2.7%. Based on institutional expectations, US prices in December are anticipated to be stable with little change. Historically, US CPI data was missing for October, having previously remained elevated in the 2.8% to 3% range. In November, the core CPI year-over-year rate plummeted to 2.6%, hitting its lowest level in nearly a year, signaling a weakening trend in US inflation. Even if the December data shows a rebound, a small increase is unlikely to alter market expectations for persistently soft US inflation. The Fed's monetary policy is based on inflation expectations, and the current state of weak inflation increases the probability of rate cuts. The mainstream view suggests that the Fed's first rate cut could occur in March of this year, with a total of three 25-basis-point cuts expected within the year. This expectation is predicated on continued softness in the US inflation rate. If the December and first-quarter 2026 CPI data show an unexpected rebound, the timing of the first cut and the total number of cuts for the year could change. The US Bureau of Labor Statistics will release the Producer Price Index (PPI) data for November at 21:30 this Wednesday. This data serves as a leading indicator for CPI. However, since the PPI release follows the CPI data this time, its predictive power is diminished. The transmission of PPI changes to the consumer level takes time; therefore, while the November PPI cannot directly predict December's CPI, it still influences the outlook for future price trends.
The US Energy Information Administration (EIA) will release its monthly Short-Term Energy Outlook report at 1:00 this Wednesday. On the same day, the Organization of the Petroleum Exporting Countries (OPEC) will also release its monthly crude oil market report. The EIA crude oil report is based on US supply and demand data, while the OPEC report is based on production data from OPEC+ member countries. Analyzing these two reports together provides insight into the situation of the US, the largest consumer, and OPEC+, the key supplier, aiding in the assessment of future international oil price trends. Following the US mandate that all Venezuelan oil be sold to the United States, the supply and demand dynamics of the international crude oil market have become increasingly complex. Venezuela is a founding member of OPEC+, producing approximately one million barrels of oil per day. The US directive disrupts the statistical accounting of OPEC+ supply data and affects the consistency of production cut or increase actions among member states. A key point of interest will be whether OPEC comments on the Venezuela situation in its monthly report; any such commentary could have a significant impact on international oil prices.
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