Updated

Updated · Bloomberg · Jul 16

Nickel Jumps 2.8% to 3-Week High as Fed Bets Fade and Indonesia Risks Cloud Supply

Updated

Updated · Bloomberg · Jul 16

Nickel Jumps 2.8% to 3-Week High as Fed Bets Fade and Indonesia Risks Cloud Supply

Q: With US inflation data softening, has the Federal Reserve's fight against high prices officially ended?

No. Softer June inflation data has reduced expectations of an immediate Federal Reserve rate hike, but it has not ended the Fed’s campaign against inflation. Markets reacted to the June CPI and PPI reports by scaling back bets on further tightening, which helped lift metals such as nickel. A 0.4% monthly drop in CPI and a 0.3% fall in PPI suggested some near-term easing in price pressures, especially from energy. That is why traders now see less urgency for the Fed to raise rates right away. But the Fed’s own stance remains cautious. Its preferred inflation gauges are still above target: total PCE inflation was running at 4.1% in May and core PCE at 3.4%, both well above the central bank’s 2% goal. June FOMC projections also showed inflation expected to stay above target through 2027, with policymakers marking up their expected path for interest rates. Fed officials have explicitly rejected any “mission accomplished” reading. Chair Kevin Warsh has said the central bank has “no tolerance for persistently elevated inflation,” and other officials have stressed that it would take several months of favorable data to be confident inflation is moving sustainably back to 2%. The main takeaway is that the latest data changed the timing debate, not the objective. The Fed may pause, but it has not declared victory. If energy prices rebound, supply shocks worsen, or underlying inflation stays firm, another rate increase later this year could still return to the table.

1 articles · Updated · Bloomberg · Jul 16

Nickel rose as much as 2.8% on the London Metal Exchange, reaching a three-week high and leading gains among base metals.
Softer-than-expected US producer prices drove traders to trim expectations for further Federal Reserve rate hikes, easing pressure on industrial metals.
Lower rate expectations matter because higher borrowing costs typically curb manufacturers' demand for metals such as nickel.
Indonesia, the top producer, added another tailwind as uncertainty over its mining policy clouded the global supply outlook for the battery metal.