. In other words, record commodity prices could mean that monetary policy is too loose, even after a number of rate hikes by the Fed.Instead, it would seem that a series of random one-off factors drove up the prices of different commodities. a barometer of economic activity, because of copper’s wide range of applications — in construction, appliances, and much more. In this case, though, traders
U.S. gross domestic product has been growing at a fast clip, at an annual rate of 8.3%, 5.1%, and 4.3% in the most recent quarters. The idea that monetary policy could be loose might come as a surprise to many noneconomists given that the Fed has raised its target interest rate to the highest level in decades and rates on products like mortgages and auto loans have soared. But high rates do not necessarily mean that money is tight, as shown by the fact that rates were often far higher during the Great Inflation of the 1960s and 1970s.
A second is that if a monetary policy change leads investors to think growth will be stronger, they will also anticipate greater demand for commodities. That’s because economic growth means more use of metals for construction, wood for homebuilding, and so forth. David Jacks, the J.Y. Pillay Professor of Social Sciences at Yale-NUS College and professor of economics at the National University of Singapore, said in an email to thethat the activity in commodities markets reflects “remarkably loose fiscal policy.”