T & K Futures and Options Believes that the Current Inflation Rate Will Rise Dramatically Because of the Recent Rate Cut

T & K Futures and Options believe that the recent interest rate cut by the US Federal Reserve Bank and monetary interventions by many central banks around the world will lead to a dramatic rise in the current inflation rate. These central banks added liquidity to offset the negative effects that the sub-prime US mortgage collapse may have on the stock markets around the world. However, this excess liquidity might also cause extreme monetary inflation and drive many commodity futures prices much higher. When the supply of a currency goes up the value of that currency usually decreases. When this happens, it takes more of the currency to purchase the same amount of a commodity. This is called inflation.

Some examples are the rising costs for fuel, fertilizer, feed and pesticides faced by US grain and livestock producers. Each dollar purchases less of these necessary commodities which in turn drive the costs of grain and livestock production higher. Consumers are then forced to pay more for the commodity and their dollars buy less. Now consider that the world’s energy and food demands are increasing exponentially because of population growth and a higher quality of living that is being experienced around the world but especially in India and China. Commodity futures prices and the current inflation rate may very likely increase dramatically over the next few years.

We believe that commodity futures prices will continue to rise and the current inflation rate will rise dramatically over the next few years as higher demand for commodities continues. In the meantime, we expect volatile commodity futures prices and many opportunities for commodity futures trading. Interest rate futures, currency futures and stock indices can expect extreme volatility over the next few months. We also believe that commodity futures prices for energy and food will be very volatile for the next few years. Volatility is a double edged sword and can work against you as well as for you so make sure that you are not under capitalized and manage you risk effectively before beginning any commodity futures trading campaign. Visit tkfutures to learn more about the mechanics and risks involved in commodity futures trading.

The author of this article is a 14 year veteran of the commodity futures trading and commodity options market and the president of T & K Futures and Options Inc.