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By HaleStewart November 11, 2013 1:20 pm
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Low Commodity Prices Are Giving Central Banks Plenty of Room to Keep Rates Low

Above is a chart of the DBC ETF, which tracks the overall commodities index.  The chart is weekly, and it shows that overall commodity prices are near multi-year lows.  Whether it's a copper glut, the US's decreasing demand for oil, China's cotton buying program or the overall solid agricultural output this last growing season, there is plenty of downward pressure in the commodities asset class. 

Overall global growth is slow right now, meaning there is no demand pull inflation.  And the chart above and general tenor of the commodities markets indicates there is no supply push inflation in the system.  This means that banks can keep rates at low rates for an extended period of time without concern they are stoking inflationary pressures.

Hale Stewart is a former bond broker who has been writing about economics and financial markets since 2006 on the Bonddad Blog.  He is also a tax attorney with a domestic and international practice while also forming and managing captive insurance companies for US companies.   You can follow him on twitter at:@captivelawyer

 

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