This month has seen Central banks ramp up their battle against runaway inflation, led by the Federal Reserve announcing a “super-sized” rate hike.
Declaring that it’s essential to tame inflation, the Federal Reserve raised interest rates by 75 basis points last week – the biggest increase since 1994 with Fed Chairman Jerome Powell signalled yet another jumbo sized hike next month.
With inflation running out of control, the only plausible option left now is for the Federal Reserve to continue raising rates aggressively until policymakers break inflation, but this may also come at the risk of breaking the economy.
And the Fed is not alone on this journey.
One day after the Federal Reserve’s biggest interest-rate hike in 30 years, many other central banks jumped on the Rate Hike bandwagon, scrambling desperately not be left behind – in what can only be described as a panic move – unleashing havoc across the financial markets.
Last week, the Swiss National Bank made a surprise 50 basis points rate hike for the first in 15 years. While the Bank of England moved rates to the highest level in 13 years as it anticipates inflation to hit 11% this year.
Elsewhere, the Reserve Bank of Australia equally surprised the market with a 50 basis point hike, while The Reserve Bank of New Zealand and The Bank of Canada followed suit with their own 50 basis point rate hikes.
This is return as increased the odds of a recession to 85% – with a long list of leading Wall Street banks predicted “significant risk” of a recession by mid-2023.
While all so-called risk assets such as Equities, Cryptocurrencies and FX are now officially in a bear market – on the flipside, Commodities across the board from the Metals, Energies to Soft Commodities are now officially in a bull market – and 18 months into potentially a decade long Commodity Supercycle, according to Goldman Sachs.
As everything from Equities, Cryptocurrencies to the FX markets continue to crash – there’s no denying that Commodities have proven to be the most reliable and stable asset class out there.
This is incentivizing savvy traders to diversify their holdings into Commodities to maximize on the dual benefits of safety and high returns on offer in this new economic climate, we now find ourselves in.
Looking ahead, more big moves could be on the horizon with the Federal Reserve back in the spotlight again.
Fed Chair Jerome Powell is due to testify before Congress on Wednesday and Thursday in the wake of the U.S central bank’s largest rate hike in more than a quarter century. Powell’s comments will be closely scrutinized for fresh clues on the size of the next interest rate hike in July – which as we know, always has the potential to move the markets significantly.
Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions.