Weekly commodity wrap-up

Interest rate Daze

Inflation numbers reported this week showed the Consumer Price Index was up 0.4% in March, which was higher than expectations and higher than February’s pace putting the annual rate of inflation at 3.5% above last month’s reported 3.2%. Core was up 0.4% as well, though the annual figure remained unchanged at 3.8%.

The Fed’s position is always one of that between a rock and a hard place. But the ability to maneuver through the tumultuous times of the past few years has been somewhat obvious and blameless.

Disagree with the blameless part if you want as the current Fed administration could have started raising interest rates sooner or not lowered them as much as they did with the initial COVID-19 outbreak, but their hands were probably tied on a lot of the decisions made and the most obvious and logical path forward presented itself to them. They took it with a level head and steady hand.

The past four months have been a little less obvious and a little less steady ever since the Fed came out with a timetable prediction for lowering interest rates. In his December presser, Chairman Powell stated, “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.”

A timetable prediction might not have been necessary as annual inflation rates had yet to see a move below 3%.

However, it could prove useful. It has provided a dry run of sorts for the economy to react to the idea that interest rates will soon be lowered vs. actually lowering interest rates. It’s much easier to take your hand off the hammer used to break the glass in case of emergency then it is to fix the broken glass.

What remains to be seen is whether the Fed has pulled its hand off the hammer for sure and how the economy will fully react when/if they do.

Have a comment or question? Please reach out to derrick.hermesch@pinionglobal.com or call at 785-338-9605

Information contained herein is believed to be reliable but cannot be guaranteed as to its accuracy or completeness. Past performance is no guarantee of future results or profitability. Futures and options trading involve substantial risk of loss and is not suitable for all investors. All information, including this specific material, used and distributed by Paragon Investments LLC (PI) shall be construed as a solicitation for entering into a derivatives transaction. PI does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71.