Monetary Policy Impact on Commodities
Traders now expect the central bank to continue raising rates aggressively with further 50 basis point hikes in the coming months. That has prompted concerns about “stagflation” – a period of high inflation accompanied by a slowdown in economic growth – and eventual 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 rise above 10% as a result of the Russia-Ukraine war, lockdowns in China and soaring energy prices. It also warned that the economy will slide into recession this year.
As traders very well know – that both scenarios, whether that’s persistent inflation or a recession, ultimately present an extremely bullish backdrop for commodity prices.
To quote Goldman Sachs “we’re still only at the first inning of a multi-year, potentially decade-long Commodities Supercycle”.
Commodity Price Forecast for 06.05.22
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