Will surging food and Energy prices push inflation higher again? [Video]

Federal Reserve officials still regard stubbornly high inflation as an ongoing threat that could require further interest rate hikes, according to the Minutes of their July Monetary Policy Meeting.

Minutes from the FOMC’s July 25-26 Monetary Policy Meeting revealed that most participants continue to remain concerned by “significant upside risks to inflation”.

And that means a rate hike in September, still remains on the cards.

On reflection, it seems as if Fed officials are leaning more to the view that there is going to be long-term inflation pressures despite recent progress.

Broader economic shifts are also driving speculation that inflation is going to be sticky and may remain stubbornly above the Fed’s 2% target, for much longer than initially anticipated. 

Some of these factors include: demographics that may push up wages as aging workers retire, a shift away from globalization as BRICS nations make advance progress in creating their own micro economy, the disruptive effects of climate change on agriculture and the global initiative to combat global warming by shifting away from fossil fuels.

Almost all, if not every one of these inflationary factors remains outside the Fed's control and that's a real underlying concern for the economy.

Historically since the 1920s, there have always been “three waves of Inflation”.

According to economists, the uptick in Agriculture and Energy prices is a very reliable indicator that inflation is heading back up in the fourth quarter of the year. In other words, a “second wave” of inflation on the way.

In an ideal world, to get inflation down to the Fed’s desired 2% target – Oil prices would need to fall below $60 a barrel and stay there. Unfortunately, with Saudi Arabia's aggressive policy aimed at keeping Oil prices high – $80 a barrel appears to be the new floor for the market.

Meanwhile, 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.

Orange Juice prices have quadrupled this year and are setting new record highs almost every week. So far this year, Orange Juice prices have tallied up an impressive gain of 572% from their 2020 lows.

Elsewhere, Cocoa prices have risen 400%, while Sugar prices have racked up a phenomenal gain of over 450% from their 2020 lows.

During the previous Commodity Supercycle in the early 2000s – Agriculture prices posted a whopping gain of 4000% within a 10-year stretch.

If history is anything to go by, this rally is only just getting started!

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