Source: Golden Ten Data

The World Bank pointed out that although global commodity prices have declined, they are still stable at a high level, which may hinder the pace of interest rate cuts by central banks.

According to a report released by the World Bank on Thursday, commodity prices remained stable after experiencing a sharp drop of nearly 40% from mid-2022 to mid-2023. The report predicts that unless costs rise further due to the intensification of the Middle East conflict, global commodity prices are expected to fall 3% in 2024 and continue to decline by 4% in 2025. Despite this, commodity prices are still too high, and the report predicts that inflation will still be higher than most central banks' targets and will be about 38% higher than the five-year average before the COVID-19 pandemic.

World Bank Chief Economist Indermit Gill emphasized: “As one of the key factors in curbing inflation, the decline in commodity prices has actually come to a standstill. This means that global interest rates this year and next are likely to be higher than currently anticipated. The global economy is currently in a weak state, and any major energy supply shock could reverse most of the gains made by the world in controlling inflation in the past two years.”

The report predicts that the average price of Brent crude oil will remain around $84 per barrel in 2024. If the worsening situation in the Middle East causes further supply disruptions, oil prices may break through $100 per barrel. Furthermore, the costs of key metals used in the clean energy transition, such as copper and aluminum, are expected to rise this year as well.

Howard Lutnick, CEO of Cantor Fitzgerald, predicts that the Federal Reserve may only cut interest rates once this year on the eve of the US presidential election. In an interview, he said, “I'm guessing it's September, but this is more about making a statement than actually stimulating the economy. This is to help the person who is hiring you now a little bit. Just cut interest rates once; that's all; it's just a gesture.”

Currently, Wall Street is generally concerned about whether the Federal Reserve will cut interest rates during the year and how much interest rate cuts will be. As inflation picks up, the Federal Reserve may delay cutting interest rates, and may even need to reassess whether current interest rates are sufficient to cope with inflationary pressure.

Lutnick also mentioned in the interview that market volatility is expected to increase before the US election (September and October), and investors tend to operate conservatively in an uncertain environment because election results are difficult to predict. But once the election results are clear, “the market will quickly return to normal.”

There are also optimistic analysts in the market. For example, Chris Harvey of Wells Fargo Securities said, “We don't care if we cut interest rates once, twice, or three times, because this will be a multi-year cycle of interest rate cuts,” but he warned, “Just don't raise interest rates again; that's not a good thing.”