Commodities Are Rising… But the Framework Is Shifting

There’s a tension building in markets right now.

On one side:

👉 Commodities are pushing higher
On the other:

👉 The Fed may be starting to reinterpret inflation
Those two things don’t usually sit comfortably together.

The Catalyst: A Quiet but Important Shift

At his confirmation hearing, Kevin Warsh didn’t just disagree with the Fed.

He challenged the metric they rely on most.

Core PCE.

Why?

Because it excludes energy.

That’s not a small comment.

That’s questioning the core framework behind policy decisions.

And so we can see below previously other methods of reading inflation have sometimes been delayed.

What He’s Looking At Instead

Rather than reading Core PCE, the focus shifts to:

• Dallas Fed Trimmed Mean
• Cleveland Fed Median CPI
• +2%

Both strip out volatility.

Both smooth monthly.

But importantly:

👉 Inflation may be closer to target than the Fed currently signals.

Why This Matters

Markets don’t just react to data.

They react to how that data is interpreted.

If policymakers begin to favour these measures:

• Inflation looks less pressured
• The case for cuts gets stronger
• “Higher for longer” becomes less certain

But Here’s the Disconnect

At the same time…

That’s not typical retail activity.

That’s institutional positioning.

So What Is the Market Saying?

On one side:

• Policy thinking → inflation easing
• Case for softer rates building

On the other:

• Commodities firming
• Energy seeing large-scale participation

👉 That leaves more forward underlying price pressure still being present.

Source: TradingView

Why This Matters for Markets

If the Fed shifts its framework:

👉 Policy could become more accommodative sooner than expected

That tends to support:

• Equities
• Risk assets
• Liquidity conditions

But…

If commodities and energy flows are right:

👉 The Fed risks easing into persistent inflation

The Risk No One Is Pricing Clearly

This is where it becomes important.

If Warsh is right:

👉 Policy is currently too tight
→ Markets may reprice toward easing

If he’s wrong:

👉 Inflation may still be sticky
→ Policy easing becomes a risk

What Happens Next

Watch frameworks shift.

Markets don’t move cleanly.

They diverge.

• Commodities say one thing
• Policy signals say another

That’s usually not stable.

Final Thought

We’ve already started to see yields move higher following these developments.

At the same time, energy appears to be potentially forming a base.

That combination is worth paying attention to.

It’s something we’ll be watching closely over the coming weeks.