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[Quick Facts]

1. Thousands of Detroit casino workers go on strike.

2. U.S. President Biden promises to aid Gaza and Israel.

3. The U.S. has temporarily lifted oil sanctions on Venezuela.

4. Fed's Beige Book sees U.S. growth as stable or slightly weaker.

5. Fed's Waller favors holding rates steady and thinks it's premature to discuss rate cuts.

6. A former BOJ official expects a possible end of negative rates by year-end.

7. With inventories falling, demand is a key driver of oil prices.

[News Details]

Thousands of Detroit casino workers go on strike

Three casinos (MGM Grand, MotorCity Casino Hotel, and Hollywood Casino at Greektown) in Detroit, Michigan, the United States, failed to reach an agreement on welfare benefits with unions on Oct. 17, local time, resulting in a strike by the 3,700 workers of the three casinos. It was the first strike in more than 20 years since the three casinos opened.

Data from the Detroit Casino Council suggests that Detroit casino workers have received only 3% pay raises since 2020, while local inflation has risen 20%.

Strikes keep going on in the United States. In mid-September, about 34,000 of the 146,000 workers of the three major automakers, including Ford, were on strike as the United Auto Workers failed to reach a new labor agreement with the three automakers. The strike has been going on for over a month.

U.S. President Biden promises to aid Gaza and Israel

U.S. President Joe Biden visited Israel on Wednesday and pledged more aid to Israel. He argued that a rocket-launching blunder by Gaza militants caused a deadly hospital explosion that derailed talks to prevent the war from expanding.

The White House National Security Council echoed Biden's comments, saying the U.S. assessment was based on analysis of overhead imagery, intercepts, and open-source information.

Biden said the U.S. would provide $100 million for humanitarian assistance to Palestinians in both Gaza and the Israeli-occupied West Bank. Biden also said he would ask Congress this week to provide an "unprecedented" package of aid to Israel, but no action would be likely until the House of Representatives elected a new speaker.

At the end of Biden's visit, Israeli Prime Minister Benjamin Netanyahu's office issued a statement saying that Israel would allow food, water, and medicine to enter southern Gaza via Egypt. Israel reiterated that it will not allow aid to enter Gaza from Israel until Hamas releases some 200 hostages it took in the Oct. 7 attack.

The U.S. temporarily lifts oil sanctions on Venezuela

The U.S. Treasury Department issued a stay order authorizing transactions with Venezuela's oil and gas sector for six months. The Treasury added that it is prepared to "modify or revoke the authorization at any time" if commitments are not met. This means that the U.S. will temporarily lift some key sanctions against Venezuela's oil and gas sector.

In November 2022, the White House eased sanctions on Venezuela to allow Chevron to increase oil production in its joint ventures there with Venezuela's state-owned PdV.

Fed's Beige Book sees U.S. growth as stable or slightly weaker

The Federal Reserve's Beige Book showed that the near-term outlook for the U.S. economy was generally described as stable or having slightly weaker growth, and tightness in the labor market continued to ease. Economic activity in most districts has remained largely unchanged since the release of the September Beige Book report. Consumer spending was mixed due to differences in prices and product availability which was particularly pronounced among general retailers and automobile dealers. Overall price increases have moderated. Some districts reported a decrease in the number of firms expecting significant price increases in the future. Wages increased at a moderate to modest pace in most districts. There were multiple reports of firms modifying their compensation packages to mitigate higher labor costs, including allowing remote work in lieu of higher wages and reducing sign-on bonuses.

Fed's Waller favors holding rates steady and thinks it's premature to discuss rate cuts

I believe we can wait, watch, and see how the economy evolves before making definitive moves on the path of the policy rate, said Fed Governor Christopher Waller. I will carefully watch the data performance, and then determine whether the economy is really cooling and whether nominal price increases have accelerated. It is still possible that we could raise rates one more time, and whether and when to do so will be data-driven, added Waller.

For now, it is too early to draw conclusions, but there's no doubt Waller favors holding interest rates steady at the rate decision meeting two weeks later.

During the Q&A part, Waller said it was premature to discuss a rate cut. He believes that the Middle East conflict will have little impact on U.S. economic growth unless there is an escalation and expansion of the conflict.

The comments came a day before Fed Chairman Jerome Powell was due to deliver a policy speech in New York. In recent days, several Fed officials have said that rising U.S. Treasury yields indicate that financial conditions are tightening so further rate hikes may not be needed.

A former BOJ official expects a possible end of negative rates by year-end

Similar to the Federal Reserve, the Bank of Japan (BOJ) has only two monetary policy meetings left this year, and it will announce its interest rate decision on Oct. 31 and Dec. 19, respectively. More data and remarks are now pointing to that Japan's monetary policymakers will pull off a historic moment at the end of the year.

The Bank of Japan may cancel negative interest rates by the end of this year to adjust the currently excessive level of monetary easing, said former BOJ Monetary Policy Committee member Makoto Sakurai on Wednesday. Given the current state of the economic recovery, the Bank of Japan may act at any time. Makoto Sakurai thought that the Bank of Japan appears to be cautious under the leadership of the new Governor Kazuo Ueda, but they are taking policy steadily and faster than expected. Makoto Sakurai, who was a monetary policy member from 2016 to 2021, not only has a close relationship with former Governor Haruhiko Kuroda but also knows Kazuo Ueda very well. He had successfully predicted the BOJ's unexpected adjustments to its yield curve control policy in late 2022.

Also, people familiar with the matter revealed on Wednesday that the BOJ will raise its inflation forecast for the current fiscal year, which ends in March 2024, to 3% from 2.5% in its economic forecast to be released at the end of the month. In addition, the BOJ will also raise its 2024 inflation forecast from 1.9% to above its 2% policy target.

With inventories falling, demand is a key driver of oil prices

The EIA data confirmed the API report, with all categories of inventories declining. Most notably, gasoline inventories have plummeted. The replenishment of the Strategic Petroleum Reserve (SPR) has stalled and hasn't made any progress for 6 weeks. Cushing crude inventories fell to their lowest level since October 2014. Brent and WTI crude oil futures forward curves have moved higher on expectations that supply disruptions may persist. A possible U.S.-Venezuela deal would have limited short-term impact on supply due to Venezuela's poor infrastructure. Demand remains a more important short-term driver of oil prices.

[Focus of the Day]

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