Interest Rate Hikes And How Will It Affect The Commodities

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Interest Rate Hikes And How Will It Affect The Commodities

More Interest Rate Hikes Are Coming - How Will It Affect The Commodities?

We are halfway through 2022, and a few things are not very certain - High inflation, recession risks, and rate hikes all around the world! Whether you believe it or not, but all of these things are interconnected and have created a rather difficult financial situation.

Another thing that is certain is that central banks were late in tackling the inflation problem. As a result, it has become more of a high-stakes race in which every player is trying to move too fast! For example, the interest rates are increased at a fast pace in an effort to curb inflation - However, inflation is taking no notice of such policies and just continues to run wild!

In fact, this fast pace of rate hikes has created a situation in which the global economy can also enter into a full-blown recession. If this happens, then it would take a lot more than simple monetary changes by the central banks to combat the situation.

ECB Also Joined The Party

The European Central Bank, which has been dovish for years now, also joined the rate hike club. In fact, ECB raised interest rates for the first time after a period of more than 10 years!

On top of that, the interest rate hike was at 50 basis points - This is in line with the large-sized interest rate hikes around the world.

Similarly, the US Fed also raised interest rates by 75 basis points and is showing signs of a very aggressive policy. Such a policy was last seen in 1981, which highlights the severity of the situation.

Effect On Commodities

After the energy crisis in Europe and the recent interest rate hikes, it has become apparent that inflation will remain a problem for years to come.

The price of natural gas is x11 times more than the normal price range. On top of that, the winter months are yet to come when gas consumption peaks!

Similarly, the petrol and diesel prices are also high, which is putting pressure on the prices of pretty much everything! And with these massive interest rate hikes, things could get messier.

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