The World Bank stated that global commodity prices have stabilized following last year’s sharp decline, noting that this could make it difficult for central banks to rapidly reduce interest rates.
The World Bank released the April 2024 issue of the “Commodity Markets Outlook” report.
The report indicated that global commodity prices fell by about 40% between mid-2022 and mid-2023, which played a decisive role in reducing general inflation last year.
Since mid-2023, it has been noted that the World Bank’s commodity price index has remained essentially unchanged, with the assumption that there will be no further escalation in geopolitical tensions, a 3% decline in global commodity prices is forecasted for this year, and a 4% decline in 2025.
The report emphasized that this pace would have little effect on suppressing inflation, which remains above central bank targets in most countries, and highlighted the possibility that rapid interest rate cuts could become more difficult.
Over the past 2 years, persistently high geopolitical tensions have supported the prices of oil and many other critical commodities, with the average price of a barrel of Brent crude expected to be $84 this year and $79 next year, assuming no supply disruptions due to conflicts.
The report noted that if the conflict in the Middle East escalates further, disruptions in oil supply could push global inflation higher, with a moderate supply disruption potentially pushing prices up to $92, and a more serious disruption pushing Brent crude prices above $100, almost raising global inflation by 1 percentage point.
Geopolitical challenges are expected to support gold prices The report mentioned that the average price of gold, a popular choice for investors seeking a “safe haven,” is expected to reach a record high in 2024 before experiencing a slight decline in 2025, with strong demand from central banks in developing countries and increasing geopolitical challenges expected to support gold prices throughout this year.
The report also stated that escalating conflicts in the Middle East could also raise prices for natural gas, fertilizer, and food.
The report pointed out that increased investments in green technologies have boosted the prices of key metals critical for the global transition to clean energy, with copper prices expected to rise by 5% and aluminum prices by 2% in 2024.
“Global inflation maintains its resilience” Commenting on the report, Indermit Gill, Chief Economist of the World Bank Group, stated that global inflation continues to maintain its resilience, saying, “The decline in commodity prices, which is the fundamental force behind reducing inflation, has actually hit a wall. This means that interest rates could remain higher this year and next year than currently expected.”
Gill noted that the world is going through a delicate period, and emphasized that a major energy shock could undermine much of the progress made in reducing inflation over the past 2 years.
Ayhan Köse, Deputy Chief Economist of the World Bank Group, also emphasized the need for central banks to be cautious about the inflationary effects of sudden increases in commodity prices amid rising geopolitical tensions.
source: aa.com.tr/ prepared by Melisa Beğiç