Weekly commodity wrap-up

Interest rate cut parties postponed

The March Consumer Price Index report covering the month of February was released this week. Core CPI was up 0.4% month on month and 3.8% year on year. That is an increase from the 0.3% shown for the month of January.

Predicting when the Federal Reserve will pivot and start lowering interest rates has been the meat and potatoes of financial news talk for the past six months as the Federal Funds Effective Rate was raised to 5.33% back in September and has remained there ever since.

Early predictors of Fed cuts were thrown a bone in December when Fed Chairman Jerome Powell shared the first signs of a dovish tone when he expressed, “If the economy evolves as projected, the median participant projects that the appropriate level of the federal funds rate will be 4.6% at the end of 2024, 3.6% at the end of 2025 and 2.9% at the end of 2026.”

The majority of rate cut predictions have now been pushed back to June or later before we see the first cut when there were several predicting a rate cut by the March-April timeframe back in December.

Media personalities trying to make a name for themselves are famous for embracing the Ricky Bobby philosophy of, “If you’re not first you’re last,” so it’s no surprise to see early predictions fall by the wayside. Most market participants and experienced talking heads not needing to make a name for themselves don’t appear to be too worked up about the difference between the first rate cut coming in March 2024 or March 2025.

The real surprise would be if the Fed decides to raise rates again. That is certainly not the odds-on favorite. But another couple of months with 0.4% month-over-month inflation or more and the Ricky Bobbys currently making left turns around the track with their prediction of rate cuts will start making right turns with predictions of rate increases.

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