Recently, I received questions asking my opinion on their borrowing cost, if they should go for fixed or float rates. We somehow know there is inflation, but not exactly sure how long it will last and how bad it will get. Because higher inflation leads to higher interest rates.
While I cannot advise them as I do not have a banking license to do so. However, I can point them to the commodity markets, I hope by doing so, it can help them to understand and read into the direction of interest rates with greater clarity.
Rice is a staple in the diets of more than half of the world’s population, especially in Latin America, Asia, and the Middle East. Annual production of milled rice tops 480 million metric tons, which makes it the third most-produced grain in the world after corn and wheat.
An increase in rice prices or edible commodities will really add pressure to the existing global inflationary pressure. Hardship will be more intense especially compared to other commodities like crude oil.
In short, people can still live with some inconvenience without cars, but not without food.
Therefore, when food prices become much more expensive, the central bank's immediate and urgent measures is to counter it by raising interest rates.
Though interest rates should be trending higher both in the short and long-term, there are some silver linings to note, both bad and good works as a pair.
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$DJIA(.DJI)$ $S&P 500(.SPX)$ $NASDAQ(.IXIC)$ $Rice - Sep 2022(ZR2209)$$Rice - Nov 2022(ZR2211)$
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