World’s largest wealth fund issues inflation warning on hot commodity markets
    real wildcard

    WORLD  25 April 2024 - 05:04

    CNBC carries an article about numerous wild cards in financial markets, Caliber.Az reprints the article.

    The chief executive of the world’s largest wealth fund says there are many wild cards in financial markets right now, but the “big worry” for investors is what a commodities rally could mean for the inflation outlook.

    Nicolai Tangen, CEO of the Norges Bank Investment Management (NBIM), told CNBC’s “Squawk Box Europe” on April 23 that soaring energy and raw material prices could prove to be a significant headache for major central banks as they continue to fight inflation.

    As of April 23 afternoon, the S&P GSCI, a benchmark index that tracks the performance of global commodities, had jumped 9 per cent since the start of the year, outpacing the broad S&P 500 index.

    Oil and copper prices have climbed around 13 per cent, respectively, year-to-date, while gold has repeatedly notched fresh record highs in recent months.

    Asked whether he had any concerns about hot commodity markets, NBIM’s Tangen replied, “Yes, the big worry is just what that could mean for inflation right?”

    He added, “So, if energy and raw material prices continue to move up, that is going to feed through to end-product prices, which are going to be higher. And that could be the real wildcard when it comes to inflation expectation.”

    NBIM manages the so-called Norwegian Government Pension Fund Global. The world’s largest sovereign wealth fund, which was valued at 17.7 trillion kroner ($1.6 trillion) at the end of March, was established in the 1990s to invest the surplus revenues of Norway’s oil and gas sector.

    To date, the fund has put money in more than 8,800 companies in over 70 countries around the world, making it one of the largest investors across the globe.

    Fewer rate cuts

    European Central Bank President Christine Lagarde had also signaled the impact of commodity prices last week, in the broader context of the institutions next monetary policy steps. She said the central bank remains on course to cut rates, barring any major shocks — but stressed that the ECB would need to be “extremely attentive” to commodity price movements.

    “Clearly on energy and on food, it has a direct and rapid impact,” Lagarde said.

    Euro zone inflation slowed by more than expected to 2.4 per cent in March, bolstering expectations of a near-term rate cut. Market pricing for interest rate cuts, which has been highly volatile in recent weeks, now also points to the ECB appearing set to ease monetary policy before the US Federal Reserve.

    With most readings putting US inflation at around 3 per cent and not moving appreciably for several months, traders on April 23 afternoon were pricing in a 13 per cent chance of a US rate cut in June, according to the CME Group’s FedWatch tool. That’s down from nearly 70 per cent last month.

    Tangen said Norway’s wealth fund continued to believe it would be “tough” for central banks to get inflation down toward target levels, and major central banks would move differently, depending on local inflationary pressures.

    Acknowledging multiple factors that now underpin inflation, Tangen said, “You have some of the geopolitical tensions, you have near-shoring, you have the climate effect on food through the world’s harvest, you’ve got some changes in trading routes and so on, and wage inflation is also higher than perhaps we had expected.”

    He added, “We are expecting fewer rate cuts than the market did, of course, earlier in the year. I have to say my surprise is that the market has taken it so well. I would have expected the market to have reacted more negatively to this postponement of interest rate cuts.”

    Caliber.Az

    Subscribe to our Telegram channel


Read also

Brussels shot Hungary in the back over border protection: PM Article by Anadolu Agency

25 May 2024 - 20:00

Mediated Israel-Hamas talks on hostage deal expected next week, source says

25 May 2024 - 18:15

Sweden awards 7-year command, control systems contract to Marshall Article by The Defense Post

26 May 2024 - 00:15

Ukraine’s air defence woes can’t be fixed by American aid Opinion by Defense News

25 May 2024 - 22:10

Yemen's Houthis to release 100 prisoners

25 May 2024 - 16:28

Germany proposes €500 billion defence fund for EU amid security threats

25 May 2024 - 15:50
ADVERTS
Video
Latest news

    Sweden awards 7-year command, control systems contract to Marshall

    Article by The Defense Post

    26 May 2024 - 00:15

    Ukraine’s air defence woes can’t be fixed by American aid

    Opinion by Defense News

    25 May 2024 - 22:10

    Brussels shot Hungary in the back over border protection: PM

    Article by Anadolu Agency

    25 May 2024 - 20:00

    Mediated Israel-Hamas talks on hostage deal expected next week, source says

    25 May 2024 - 18:15

    Blinken to discuss support for Ukraine in Czech Republic visit next week

    25 May 2024 - 18:00

    Heads of CIS security agencies meet in Bishkek

    PHOTO

    25 May 2024 - 17:45

    Senior UN peacekeeper deems Arab League's Gaza deployment call premature

    25 May 2024 - 17:31

    EU's Borrell urges choice: Rule of law or support for Israel

    25 May 2024 - 17:18

    Six NATO countries to create "drone wall" for border protection

    25 May 2024 - 17:02

    A deep dive into potential policies, their impact on US future

    Trump 2.0

    25 May 2024 - 17:00

    Media: Italy plans to resume funding for UNRWA

    25 May 2024 - 16:50

    Turkish transport minister foresees 1,500 block trains annually along Middle Corridor

    25 May 2024 - 16:38

    Yemen's Houthis to release 100 prisoners

    25 May 2024 - 16:28

    Azerbaijan's Defence Ministry delegation enhances military ties with Kazakhstan

    25 May 2024 - 16:14

    Can the India-Oman deal unlock strategic gains amid Gulf instability?

    Caliber.Az on YouTube

    25 May 2024 - 16:02

    Germany proposes €500 billion defence fund for EU amid security threats

    25 May 2024 - 15:50

    Azerbaijan's Shusha hosts discussions on preservation of historical monuments

    PHOTO

    25 May 2024 - 15:38

    Kremlin spox responds to mobilisation claims in Russia

    25 May 2024 - 15:28

    More than 300 buried in Papua New Guinea landslide, local media says

    25 May 2024 - 15:16

    Wanted terrorist "neutralized" in southeastern Türkiye

    VIDEO

    25 May 2024 - 15:04

    Erdogan expresses Türkiye's constant pride in Azerbaijan's advancements

    25 May 2024 - 14:53

    Azerbaijani president receives credentials of incoming Italian, Ukrainian envoys

    PHOTO

    25 May 2024 - 14:49

    ICC's controversial arrest requests for Israeli leaders

    Implications and global reactions

    25 May 2024 - 14:42

    Armenia targets another so-called "mayor" of previously occupied Azerbaijani town

    25 May 2024 - 14:36

    First Chinese trucks arrive in Azerbaijan under new Trans-Caspian pilot project

    PHOTO

    25 May 2024 - 14:34

    Despite best efforts, world is falling prey to a new set of military conflicts

    Kazakh president says

    25 May 2024 - 14:19

    US president hails bilateral ties with Azerbaijan

    25 May 2024 - 14:11

    Rafah op. doesn't contradict ICJ ruling, we will continue, Israel says

    25 May 2024 - 14:04

    US, Armenia hold joint drills against weapons of mass destruction threats

    25 May 2024 - 13:52

    Türkiye plans LNG exports to Europe from surplus gas imports

    25 May 2024 - 13:40

    Vice-President of Heydar Aliyev Foundation attends Berlin event dealing with bison reintroduction

    25 May 2024 - 13:28

    Reports suggest potential military provocation from Russia and North Korea

    25 May 2024 - 13:16

    Putin applauds Azerbaijan's well-deserved prestige on the world stage

    In congratulatory letter to President Aliyev

    25 May 2024 - 13:04

    China ends war games, Taiwan details warplane, warship surge

    25 May 2024 - 13:04

    The Guardian: After Macron’s visit, New Caledonia’s Kanak demand their own future

    "Not our president"

    25 May 2024 - 12:52

    NATO chief wants to free Ukraine to strike hard inside Russia

    25 May 2024 - 12:40

    IAEA ignores nuclear dangers of Armenia's aging Metsamor NPP

    Double standards

    25 May 2024 - 12:28

    Egypt agrees to resume aid to Gaza through Israel after US pressure

    25 May 2024 - 12:16

    Musk reveals "tough problem" battling Russian jamming efforts on Starlink

    Amid Ukraine war

    25 May 2024 - 12:06

    King Charles III expresses hope for continued UK-Azerbaijan collaboration on key global matters

    25 May 2024 - 11:58

All news