The Monetary Policy-Commodities Nexus: A Survey

Bohl, Martin T.; Humann, Niklas; Siklos, Pierre L.

Abstract

This survey synthesizes evidence on the bidirectional links between commodity markets and monetary policy. On the commodities-to-policy side, we review how shocks to energy, food, and metals pass through to inflation, inflation expectations, economic activity, and financial stability in state-dependent ways that vary by shock type, exposure, and policy regime. We complement the literature with an analysis of central-bank speeches, showing how officials classify commodity shocks and how these framings map into policy stances. On the policy-to-commodities side, we organize evidence on the transmission of monetary policy to commodity markets via financial, real-economy, and expectations channels, highlighting heterogeneity across policy instruments, commodities, and central banks. We emphasize how financialization tightens cross-asset linkages, raises leverage and margin sensitivity, and amplifies discount-rate and risk-taking mechanisms. Overall, commodities are best treated as policy-sensitive state variables, not exogenous disturbances, with implications for policy design, central bank communication, and international monetary spillovers.

Keywords
Monetary Policy; Commodity Markets; Inflation; Business Cycle; Financial Stability; Financialization