The Commodity-Consumer Price Connection: Fact or Fable?

18 Pages Posted: 11 Nov 2007


The recent surge in commodity prices has rekindled interest in their power to predict consumer price inflation. But is this interest warranted? In examining the empirical relationship between commodity prices and consumer price inflation, this article finds that commodities' reputation as useful leading indicators of inflation is actually based more on fable than fact. Testing eight commonly used indexes, the authors conclude that although commodities had some predictive power in the past, the commodity-consumer price connection has broken down in the more recent period. They argue that this shift primarily reflects the diminished role of traditional commodities in U.S. production and the "sterilization" of some inflation signals by offsetting monetary policy actions.

Keywords: commodity prices, inflation, consumer prices, monetary policy

JEL Classification: E31, E32

Suggested Citation

Blomberg, S. Brock and Harris, Ethan S., The Commodity-Consumer Price Connection: Fact or Fable?. Economic Policy Review, Vol. 1, No. 3, October 1995, Available at SSRN:

S. Brock Blomberg

Ursinus College ( email )

Collegeville, PA 19426-2562
United States

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