What do rate hikes mean for commodity prices?

Impact of monetary policy on commodities

It is the first time since 2006 that the Fed has made rate hikes in back-to-back meetings as rapidly rising inflationary pressures continue to become a major concern.

Traders now expect the central bank to continue raising rates aggressively with further 50 basis point hikes in the coming months. This has raised concerns about “stagflation” – a period of high inflation accompanied by slowing economic growth – and a possible recession.

Elsewhere this week, the Bank of England also followed in the Fed’s footsteps by raising interest rates to their highest level in 13 years.

The Bank expects UK inflation to top 10% due to the Russian-Ukrainian war, lockdowns in China and soaring energy prices. He also warned that the economy will slide into recession this year.

As traders are well aware, both scenarios, be it persistent inflation or recession, ultimately present an extremely bullish backdrop for commodity prices.

So far this year, 27 commodities ranging from metals to energies to commodities have already seen astronomical double- or triple-digit gains – And that’s just the beginning!

To quote Goldman Sachs “we are still only in the first round of a multi-year, potentially decade-long Commodities Supercycle”.

Commodity price forecast for 06.05.22

Where do the prices go next? Watch The Commodity Report now, for my latest price forecasts and predictions:

For an overview of all of today’s economic events, check out our economic calendar.

About Natalee Broderick

Check Also

Bull Vs Bear: Top 5 Triggers That May Dictate The Stock Market This Week

Bull versus bearish: After the rout of the American markets, the Indian stock market fell …