Thursday, June 19, 2008

BCA: Commodities Driving Monetary Policy

Bank Credit Analyst
In our opinion, the inflation scare is overdone.
he run-up in commodity prices is dominating media headlines and is spooking investors. However, the annual rate of change in food and energy prices is now at an extreme, which is unsustainable. Crude oil prices have risen 100% from year-ago levels and would need to surge close to $200/bbl by the end of 2008 just to maintain the current pace of inflation. Moreover, the macro backdrop in the developed world is not conducive to sustained underlying price pressures
Plus Congress is now getting involved and thee only time they don't act at the wrong time is when they act at a worse time.

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