Mecklai Graph: Policy easing fuelling commodity inflation?
Mecklai graph of the day: The Thomson Reuters/Jefferies CRB Index (TR/J CRB) is a commodity price index and is made up of 19 commodities as quoted on the NYMEX, CBOT, LME, CME and COMEX exchanges. It was first calculated by Commodity Research Bureau, Inc. in 1957.
October 23, 2012 / 12:02 IST
Mecklai graph of the day: Easing fuelling commodity inflation?
The Thomson Reuters/Jefferies CRB Index (TR/J CRB) is a commodity price index and is made up of 19 commodities as quoted on the NYMEX, CBOT, LME, CME and COMEX exchanges. It was first calculated by Commodity Research Bureau, Inc. in 1957.Quantitative easing (QE1) was first announced and effected in Nov 2008 to counter slowdown in the US economy. During the 16 months of round one up to March 2010, the CRB (Commodity Research Bureau) commodity price index rose 36%, while food prices rose 20% and oil prices surged 59%. During round two (QE2), in the eight months up to June last year, the CRB rose 10%, with food up 15%, while oil prices rose 30%. The much awaited QE3 (the third quantitative easing) has had a dramatic instant effect on commodities. By diluting the U.S. dollar, it has forced up the price of most natural resources.However, from major indexes to a variety of commodities, the past month has marked a retreat, raising questions about whether markets have already discounted Fed actions. While the gold dropped 0.7% since fed unveiled it’s policy, the broader commodity snapshot, the Reuters/Jefferies CRB index of 19 commodities has fallen 3.4%. An unlikely winner, the yield on the 10- year U.S. Treasury bond has fallen to 1.67% from 1.76% ever since the announcement of the third round. In the days ahead, it would be interesting to see the channeling of excess liquidity into the system given the historical movement into the commodities.Below graph shows the movement of Thomson Reuters/Jefferies CRB Commodity Index since Nov 2008
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