The U.S. CPI showed a slight increase in October, as reported by the U.S. Bureau of Labor Statistics on November 13.

The October CPI annual growth rate stood at 2.6%, marking a 0.2 percentage point increase from the previous month, while the month-over-month rate held steady at 0.2%. Core CPI, which excludes volatile food and energy prices, exhibited an annual increase of 3.3% and a monthly rise of 0.3%, both figures unchanged from the prior month and in line with market expectations.

Read more at Datatrack

Breaking down the components, the increase in CPI was primarily driven by:

• Energy prices, which continued to decline by 4.6% month-over-month, but at a narrower pace than the 6.0% drop observed in the prior month.
• Used car prices rose by 2.7% month-over-month, a notable increase of 2.4 percentage points compared to the previous month.
• Housing services prices increased by 0.4% month-over-month, up from a 0.2 percentage point gain in the prior month. Specifically, rent and owners’ equivalent rent rose by 0.3% (unchanged from the previous month) and 0.4% (up from 0.3%) respectively.

(Source: BLS, TrendForce)

Overall, the upward movement in inflation primarily reflected a narrowing decline in energy prices and a resurgence in used car prices, with a reduced base effect also contributing to the annual increase. Despite these factors, there was no indication of a significant acceleration in overall inflation.

Housing services inflation continues to exhibit some persistence; however, there is positive news as the annual growth rate for new lease rents in Q3 2024 was just 1.01%, down by approximately 11 percentage points from its 2022 peak and remaining at historically low levels, indicating that further cooling may be on the horizon.

(Source: BLS, TrendForce)

Following the data release, market expectations for a December rate cut by the Federal Reserve remained unchanged, with U.S. Treasury yields experiencing a modest decline. This suggests that markets still anticipate potential easing in the Fed’s rate path heading into 2025.

(Source: FedWatch)

The Reserve Bank of Australia (RBA) announced on November 5 that it will keep the cash rate target unchanged at 4.35%, marking the eighth consecutive month without a rate change and maintaining rates at a 13-year high.

The statement noted that while inflation has been gradually receding from its 2022 peak, with the annual inflation rate for the September quarter falling within the RBA’s target range of 2–3%, the central bank remains vigilant about potential upward risks to inflation. According to the RBA’s latest forecast, inflation is expected to return to the target range by the end of 2025 and align closer to the midpoint by 2026.

The restrictive monetary policy has led to a decline in economic activity over the past year; however, the labor market remains resilient, with unemployment still near a historic low of 4.1%. The RBA expects consumer spending to pick up in the latter half of the year, though slower-than-expected growth in this area could further dampen economic expansion and potentially strain the labor market.

Additionally, the RBA highlighted uncertainties in the global outlook, particularly with respect to geopolitical risks. If the protectionist Trump camp were to win the upcoming U.S. presidential election, it may impose high tariffs on China’s imports. Given that China is Australia’s largest trading partner, this could have a significant knock-on effect on Australia’s economic growth prospects.

While most Western economies have already entered a rate-cutting cycle to support or reinvigorate economic growth, the RBA has shown a strong commitment to waiting until inflation visibly recedes. This resolve has prompted the market to push back expectations for the RBA’s first rate cut from February to May.

Read more at Datatrack

• Statement by the Reserve Bank Board: Monetary Policy Decision

The Bank of Canada announced a 50 basis point rate cut to 3.75% on October 23, in line with market expectations, marking the largest rate reduction since the onset of the COVID-19 pandemic in March 2020.

Read more at Datatrack

Bank of Canada Governor Tiff Macklem stated that price pressures are no longer broad-based, and the central bank’s focus is now on maintaining stability. While consumer and business investment spending has picked up, overall economic activity remains weak. Though this may help ease price pressures, with inflation now within the target range, the bank is keen to see stronger economic growth moving forward.

Tiff  Macklem further noted that if the economy performs as expected, the Bank of Canada will continue to lower rates to keep inflation on target and support demand. However, the timing and pace of future rate cuts will depend on incomming information, and adjustments will be made incrementally.

Looking ahead, the central bank forecasts that economic growth will gradually recover to around 2% by 2025, with further growth to approximately 2.5% in 2026. This is primarily driven by stronger consumer and business investment in a lower interest rate environment. The Bank of Canada also expects residential investment to rebound as housing demand increases, while exports should rise on the back of robust U.S. demand.

On inflation, the central bank anticipates some fluctuations in the coming months but expects it to remain within the target range as upward pressures on housing and service prices ease. However, if consumer and business spending grows more slowly than expected, inflation may still face some downside risks.

(Source: Bank of Canada, TrendForce)

On October 21, gold futures on the New York Mercantile Exchange closed at $2,734.50, continuing to reach new all-time highs.

As one of the world’s primary safe-haven assets, gold has risen by over 30% so far this year. This increase mainly reflects the fact that major global economies have entered an interest rate-cutting cycle due to weakened economic outlooks. In addition, rising tensions in the Middle East and uncertainty surrounding the U.S. election have further driven gold prices upward.

Read more at Datatrack

Interest rates are a key factor in the pricing of all assets, but they are especially important for gold, as it does not provide interest or dividend income. As a result, gold’s price is highly sensitive to interest rate fluctuations.

The real interest rate (nominal interest rate minus inflation) is the key factor influencing gold prices. Typically, when real interest rates rise, gold’s attractiveness decreases relative to higher-yielding assets, leading to a drop in its price. Conversely, when real interest rates fall or turn negative, gold’s appeal as a safe-haven asset increases, pushing its price higher.

According to economic forecasts from major central banks, global interest rates are expected to decrease by 75 to 125 basis points by 2025. Therefore, the upward trend in gold prices is likely to continue through 2025.

(Source: Fed, ECB, BOE, RBA, S&P Global, TrendForce)

Last week, following TSMC’s release of better-than-expected third-quarter earnings, the U.S. S&P 500 index hit a new record high. In the bond market, U.S. Treasury yields remained largely unchanged, with the 10-year minus 2-year yield spread holding at 13 bps. Meanwhile, the U.S. dollar index continued to rise to around 103, reflecting the weakened economic outlook in Europe, which has led the European Central Bank (ECB) to adopt a more accommodative stance.

Key Economic Data Review for Last Week:

U.S. Retail Sales (September): Retail sales in September grew by 0.4% month-over-month (previous: 0.1%), surpassing the market expectation of 0.3%. Core retail sales increased by 0.7% (previous: 0.3%). Overall, U.S. consumer spending remains robust. According to a Federal Reserve survey, the current growth in retail sales is likely driven by higher-income groups, whose asset prices have risen significantly due to the wealth effect during the pandemic, making their consumption more resilient.

Read more at Datatrack

Eurozone Interest Rate Decision: As expected, the ECB cut interest rates by 25 bps, bringing the deposit facility rate, the main refinancing rate, and the marginal lending facility rate down to 3.25%, 3.40%, and 3.65%, respectively. The ECB indicated that inflation is expected to rise in the coming months before falling back to the target range next year. Recent data, however, shows that economic growth has been weaker than anticipated, particularly in the manufacturing sector and exports. Although easing policy restrictions and rising real wages may boost economic growth, overall risks to growth remain tilted to the downside.

Read more at Datatrack

China’s Monthly Data & GDP (10/18): China’s September economic data showed initial signs of improvement. Retail sales grew by 3.2% year-over-year (previous: 2.1%), exceeding the market expectation of 2.5%. Industrial output grew by 5.4% year-over-year (previous: 4.1%), also beating the market expectation of 4.6%. However, third-quarter GDP grew by 4.6% year-over-year (previous: 4.7%), with cumulative GDP growth for the first three quarters at 4.8%, still below the full-year target of 5.0%.

Read more at Datatrack

Key Economic Data Review for This Week:

China LPR (10/21): In mid-September, the People’s Bank of China (PBoC) implemented a series of large-scale monetary easing policies, including interest rate cuts, reserve requirement ratio (RRR) reductions, and housing loan rate cuts. At the end of September, the PBoC also lowered the 7-day reverse repo rate by 0.2% to 1.5%. The market expects that the 7-day reverse repo rate will guide the 1-year and 5-year Loan Prime Rates (LPR) down by 25 bps to 3.1% and 3.6%, respectively.

Read more at Datatrack

Canada Interest Rate Decision (10/23): In its September monetary policy decision, the Bank of Canada cut interest rates by 25 bps to 4.25%. With inflation and growth risks in Canada continuing to rise, the market expects the central bank to implement its fourth consecutive rate cut this month, with the possibility of a larger 50 bps cut this time.

Read more at Datatrack