Interest Rates up or down and Impact on Commodity Technology markets
I’m certainly not an economist but I can see through the political narrative trying to get interest rates down ahead of a US election. As I have argued here several months ago, I don’t see interest rates coming down anytime soon and I’m not alone. according to an article in The Street,
The president of the Minneapolis Federal Reserve Bank was clear Tuesday that he believes the Federal Reserve should not rush to to cut interest rates, and he offered up the possibility rates may actually have to move higher before the Fed starts to begin trimming.
To support a rate cut, Kashkari wants real evidence that inflation is headed for a sustained pullback to the Fed’s 2% target. And it is not likely to appear before the Fed’s next meeting on June 11-12.
AdvertisingAdvertising
Meanwhile, CNBC reported last weekend that it doesn’t expect the Fed to deliver interest rates this summer.
“The economy may not be cooling off as much as the Fed would like,” said Quincy Krosby, chief global strategist at LPL Financial. “The market takes every bit of data and translates it to how the Fed sees it. So if the Fed is data dependent, the market is probably more data dependent.”
Over the past week or so, the data has sent a pretty clear message: Economic growth is at least stable if not on the rise, while inflation is ever-present as consumers and policymakers alike remain wary of the high cost of living.
Defining what this all may mean for commodities and commodity technologies is actually quite hard for it incorporates a little of the chicken and the egg. Commodity prices have surged in 2024 and that is prompting further concerns over inflationary pressures and interest rates. The World Bank has also said that ‘global commodity prices are expected to soften this year and next but remain considerably above pre-pandemic levels, making it harder for central banks to lower inflation and loosen monetary policy.’ However, the stronger the US dollar is, supported by higher interest rates, the higher the price of those surging commodities elsewhere. Ironically, Goldman Sachs predicted commodity prices would rally further if interest rates were cut and in the interim, commodity prices did fall a little on a stronger US dollar this last week.
Right now, there is no doubt that commodity technology markets are running hot. We are seeing demand across all commodities for CTRM solutions based on informal vendor questioning. However, sales cycles do seem to have slowed somewhat so whilst there is a lot of activity, it is harder to determine how much is turning into real business for the vendors. Despite that, early research for our next market forecast suggests that many vendors have grown their headcount rather substantially in the last two years and this strongly suggests improved performance. Additionally, those vendors whose financials are available do show good gains in turnover and profitability.
Interest rates will lower at some time the question remains when. Despite the obvious political pressures to reduce interest rates in the US to help the incumbent, the evidence remains against rate cuts. However, this is also creating hype and uncertainty that frankly isn’t helping anyone’s cause. For now, and the next 6-months, it looks like commodities will remain volatile impacted by other geopolitical events and that commodity technology markets will remain buoyant.
Keep in touch and sign up to our Newsletter
