Worries about a global recession as a result of significant interest rate hikes by the major central banks weighed on commodity prices on Wednesday. Many experts are expecting a record hike of 0.75 percentage points for the interest rate meeting of the European Central Bank (ECB) this Thursday. Gilles Moec, chief economist for asset management at the insurer Axa, does not even rule out a step of a full percentage point in the fight against rampant inflation. “It is clear that a recession must not be seen as a mere side effect of the necessary monetary tightening, but as the only solution to achieve the goal.”
These prospects weighed heavily on base metals. Copper fell 0.8 percent to $7,619 a ton and aluminum was $2,239 the cheapest it was a year and a half ago. Oil prices fell to multi-month lows. A barrel of North Sea Brent cost $87.90, 5.4 percent less. Added to this was the strong dollar, which made oil more expensive for interested parties outside the dollar zone and depressed demand.
The euro was supported by speculation that the ECB would raise interest rates significantly. The shared currency rose more than a cent to $1.07 after hitting its lowest level in almost 20 years the previous day. The Japanese yen fell to a 24-year low against the dollar on interest rate speculation. Japan’s officials expressed concern. “Currency intervention or monetary policy changes by the Bank of Japan are likely to be difficult, and halting the yen’s plunge will be difficult,” said Rikiya Takebe of Okasan Securities. “Foreign central banks prioritize fighting inflation and cannot afford to worry about exchange rate fluctuations.”