As go commodity prices, so go prices across the gamut of industries, for consumers and business. Traditionally, the price of goods like oil and lumber have given an early warning signal for rising inflation due to low interest rates and the creation of new money by central banks.
Since the financial crisis in 2008, monetary policymakers have used the odd term, “easing” as a euphemism for a radically unprecedented new monetary regime of massive lending to fight deflation. Central bankers then, as now, have worried that a deflationary economic cycle would spiral into a deep recession.
After a harrowing yield-curve inversion for fixed income instruments in 2019, the U.S. Federal Reserve Open Market Committee began using the term “technical adjustment” for wildly massive lending by the Fed in overnight lending markets for large depository institutions.
The drastic increase in the price of lumber followed the creation of some $6 trillion new U.S. dollars by acts of Congress and the Federal Reserve, with other central banks around the world following suit.
Bottom Line: The worst fears of inflation hawks seemed to materialize over the previous three quarters as lumber prices skyrocketed. Now market watchers are waiting to see where lumber prices go next.