U.S Inflation Accelerates For A Second-Straight Month. What Does That Mean For Commodity Prices?

U.S. Inflation Surges to 3.7% in August, Posing Challenges for the Federal Reserve

It’s official: U.S inflation accelerated at a red-hot pace in August for a second consecutive month – adding yet another layer of complexity to the Federal Reserve’s efforts to bring consumer price pressures down to its 2% target.

The so-called Consumer Price Index, which measures the price of everyday consumer goods including gasoline, healthcare, groceries and rent – surged by a sizzling 3.7% in August. That’s its biggest monthly gain of 2023 and a significant increase compared to July’s reading of 3.2%.

More than half of the monthly increase was driven by a sharp jump in Commodity prices – which comes as no surprise considering there is a strong correlation between Commodities and Inflation. When Commodity prices accelerate, so does Inflation.

Ahead of the high-stakes Consumer Price Inflation report, WTI Crude Oil rallied above $89 a barrel, while Brent Crude Oil rocketed above $92.50 a barrel to hit fresh 2023 record highs.

Since June, both benchmarks have tallied up a stunning gain of over 25% from their 2023 lows of $63 a barrel – with a long list of Wall Street banks now calling for prices to top $100 by year-end.

Gasoline prices in the United States, which alone make up 8% of the CPI – accelerated in August, peaking at $3.954 a gallon. That’s compared to $3.676 a gallon seen only a month earlier in July.

While that remains below the record high of more than $5 reached last summer – it’s still a whopping 60% above the level when President Biden entered office in January 2021.

Global Warming-Driven Commodity Price Surge Poses Dilemma for the Federal Reserve

Elsewhere in the Commodities complex, the disruptive impact of Global Warming and Climate Change has sent Agricultural Commodities from Orange Juice, Coffee, Sugar, Corn, Wheat, Cocoa, Soybean and Rice prices skyrocketing to all-time record highs.

And the rally might not stop there!

That’s bullish news for Commodity traders, but bad news for Jerome Powell and his colleagues at the Federal Reserve, who now face one of their biggest policy dilemmas ever.

With conclusive evidence showing that a “second wave” of inflation on the way – the big question now is will the U.S Central Bank skip, pause or hike interest rates again this month?

The answer to that question may come from the hotly anticipated FOMC Monetary Policy Meeting on September 19-20. Ultimately, positioning this meeting as one of the biggest market-moving events of 2023, which traders will not want to miss out on!

Gold Price Forecast

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