MNI BRIEF: Commodities An Obstacle To Rate Cuts: World Bank
A break in the commodities disinflation trend could weigh on central bank rate cut hopes, the World Bank said Thursday.
Central banks seeking to drop interest rates face a challenge with a plunge in commodity prices stalling out and potential for inflation to pick up amid tensions in the Middle East, the World Bank reported Thursday.
Even if that conflict doesn't widen the pace of commodity price declines will slow to an average of 3.5% this year and next, hardly enough to keep pulling down global inflation according to the report. Global inflation recently dropped 2pp through a time when commodity prices plunged 40%.
“A key force for disinflation—falling commodity prices—has essentially hit a wall. That means interest rates could remain higher than currently expected this year and next," the World Bank’s Chief Economist Indermit Gill said in the report.
Brent crude oil prices could jump to USD100 a barrel in a severe Middle East conflict, up from a baseline 2024 forecast of USD84, according to the report. (See: MNI INTERVIEW: Oil Market Outlook Relatively Balanced)