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[Quick Facts]

1. Several Fed officials state that inflationary pressures are still the focus.

2. OPEC and EIA have different oil demand expectations.

3. U.S. and NATO suspend participation in the CFE treaty.

4. China's central bank increases gold reserves for the 12th straight month.

5. IMF raises its forecast for China's economic growth.

[News Details]

Several Fed officials state that inflationary pressures are still the focus

Several senior Fed officials said on Tuesday that the fight against inflation is a top priority as inflation is still too high. Many of them mentioned that rising bond yields had resulted in a tighter financial environment.

Minneapolis Fed President Neel Kashkari, the Fed's biggest hawk, said Fed policymakers have not yet won the fight against inflation, and they would consider taking more monetary tightening measures if necessary. Fed Governor Michelle Bowman said she supported the Fed's decision to leave interest rates unchanged in November, but she still expects further rate hikes. Financial conditions have tightened since September, and it's not clear how much tightening will affect the U.S. economy and inflation. She will pay close attention to the economic data to be released next. Fed Governor Christopher Waller argued that bond investors are, in fact, considering whether U.S. bond yields will resume their uptrend. The increase in government borrowing has raised expectations of higher interest rates in the future, while the Fed has left the door open for another rate hike in the coming months. However, Waller's reference to a tighter financial environment due to rising yields could weaken the incentive for further rate hikes.

Dovish Chicago Fed President Austan Goolsbee said the Fed is watching yield movements and it needs to identify the drivers of rising long-term interest rates. The U.S. job market is becoming more balanced. Still, he said he did not want to pre-commit himself to a rate decision. It is clear that inflation is a critical part of the mandate and the Fed must lower inflation first.

OPEC and EIA have different oil demand expectations

On Tuesday, OPEC Secretary General Haitham Al-Ghais said that the global economy still performs well despite macro challenges such as high inflation and high interest rates. Demand remains quite strong. The global aviation industry is expected to drive fuel demand. OPEC+ will take appropriate measures at its next meeting.

However, updated forecasts for refinery activity in China suggested lower volumes were expected throughout November and December, placing further downward pressure on prices. As the world's largest oil consumer, China's crude imports grew strongly in October, but total exports of goods and services contracted faster than expected. The U.S. Energy Information Administration (EIA) also expects total U.S. oil consumption to decline by 300,000 barrels per day (bpd) this year, reversing the 100,000 bpd growth previously forecast. The EIA's Short-Term Energy Outlook report, released yesterday, also lowered the forecast for 2023 global crude oil demand growth by 300,000 bpd to 1.46 million bpd (from 1.76 million bpd), but increased the 2024 global crude oil demand growth expectations by 80,000 bpd to 1.4 million bpd (from 1.32 million bpd). At the same time, the EIA also cut its international oil price expectations across the board for this year and next.

U.S. and NATO suspend participation in the CFE treaty

The U.S. and NATO will suspend their participation in the Conventional Armed Forces in Europe (CFE) Treaty as a response to Russia's withdrawal from the treaty, the Wall Street Journal reported. U.S. media reported earlier that Russia formally withdrew from the CFE treaty on November 7. The CFE treaty is a landmark post-Cold War security treaty aimed at reducing conventional armed forces in the European region. Russia accused the United States of expanding NATO and undermining post-Cold War security.

China's central bank increases gold reserves for the 12th straight month

On November 7, China's State Administration of Foreign Exchange (SAFE) released data showing that the size of China's foreign exchange reserves stood at US$3,101.2 billion by the end of October 2023, down US$13.8 billion, or 0.44%, from the end of September. China's gold reserves at the end of October were reported to be 71.2 million ounces (about 2,214.57 tons), a MoM increase of 740,000 ounces (about 23.02 tons). It's the twelfth consecutive month that gold reserves have increased, with a cumulative increase of 8.56 million ounces. Over the past 12 months, gold reserves in China's central bank increased by 8.56 million ounces in total. It is worth mentioning that China's central bank has increased gold holdings of about 6.08 million ounces (about 190 tons) so far this year, being the world's largest gold buyer.

IMF raises its forecast for China's economic growth

China is expected to achieve the government's growth target for 2023 due to the higher-than-expected economic performance in the third quarter and a series of fiscal measures introduced by the Chinese government, the International Monetary Fund (IMF) said at the release of its assessment of China's economy on Tuesday. Its forecast for China's GDP growth this year rose from 5% to 5.4%, and the forecast for 2024 was revised upward from 4.2% to 4.6%, both up 0.4 percentage points compared with its forecasts in the October World Economic Outlook.

[Focus of the Day]

UTC+8 15:00 Germany CPI Final MoM (Oct)

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UTC+8 17:30 BOE Gov Bailey Speaks

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UTC+8 22:15  Fed Chair Powell Speaks

UTC+8 23:00 U.S. Wholesale Sales MoM (SA) (Sept)

UTC+8 02:40 Next Day: Fed's Williams Speaks