Fed jitters take some of the steam out of the rally

Commodity prices fell back in the past week after the release of the minutes from the April FOMC signalled that US interest rates could yet rise as soon as next month. The markets are still only pricing in a 30% chance of a June hike, which suggests there may be some more weakness to come if the Fed does indeed tighten on the 15^th. Nonetheless, provided the Fed continues to raise rates only gradually against a backdrop of rising inflation and strengthening economic activity, commodity prices should be able to take further tightening in their stride.