Inflation – The Next Shockwave in Commodities?

It has been quite a long time since we had inflation rates at over 5% in the USA yet, last month, the US inflation rate hit 5.4%, the highest since 2008 and higher than the 4.9% predicted by economists. This against a backdrop of printing money like never before (over 40% of all USD in existence were printed in the last 12-months), rising prices for commodities and raw materials. Behind the inflationary pressure are also shortages of all kinds of materials and products like bicycles, used cars and more that are currently driving consumer prices ever higher. This is a direct knock on effect of lockdown policies and COVID, which helped to disrupt production, supply chains and consumption. However, USD inflation essentially erodes the value of the USD driving prices of commodities higher in the process as most are USD denominated. Plainly, this is a political topic and as reported by the FT, things are heating up there too. “We’re at a place where a set of pandemic related services are still normalising their prices back to where they were before the pandemic. We’re in a world where we see a very concentrated bottleneck around autos . . . and everything else in… continue reading

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