Has Inflation Peaked? Here’s What Commodity Prices Are Saying

Latest inflation data and comments from the Federal Reserve

In the middle of a growingly-uncertain economic environment, there was one piece of semi-good news this week with the closely watched U.S inflation report showing consumer prices didn’t rise at all in July compared with June. That’s largely thanks to a significant drop in gasoline prices, which are finally approaching $4 a gallon on average after rising above $5 in June.

While many economists and policymakers have held back from jumping to any big conclusions from this month’s data, President Joe Biden definitely wasn’t one of them.

“While the price of some things went up, the price of other things went down by the same amount. The result: zero inflation last month,” Biden victoriously declared following the data release on Wednesday.

As traders very well know – one month’s data does not make a trend. And it certainly doesn’t mean an era of rapidly surging prices – or Fed rate hikes – is over.

In response, several key Fed officials left no doubt they will continue to tighten monetary policy until price pressures are fully broken.

The Fed is “far, far away from declaring victory” on inflation, said Minneapolis Federal Reserve Bank President Neel Kashkari. His views were echoed by San Francisco Fed President Mary Daly, who also warned it is far too early for the U.S central bank to “declare victory” in its fight against inflation.

Calling inflation “unacceptably” high, Chicago Fed President Charles Evans said he believes the Fed will likely need to lift interest rates to 4% by year-end and to 4.4% by the end of 2023 – in line with what Fed Chairman Jerome Powell signalled after the Fed’s latest meeting.

Elsewhere, former Treasury secretary Larry Summers said “there’s positive news here, but not of a kind that should fundamentally alter anyone’s view” – warning that inflation could prove sticky and that it may take a recession to bring it down dramatically.

Impact on commodity prices

If history has taught us anything, then the one thing that we do know for certain is both scenarios, whether that’s persistent Inflation or a Recession, ultimately present an extremely lucrative backdrop for commodity prices.

Right now, this is a traders’ market packed with endless opportunities to capitalize on the short-term macro-driven volatility – And that’s the most profitable strategy right now!

Commodity price forecast video for August 12, 2022

Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions: