Commodity Futures and Trend Inflation

While commodity futures protect against commodity inflation, their relationship with measures of trend inflation is weak. Commodity futures do not appear to hedge inflation impulses coming from sectors other than food and energy, nor are they responsive to long-term relative rises in energy prices. While such episodes have been rare, the author cautions against assuming they are unimportant. He concludes that inflation-hedging benefits of commodities may depend on the source and persistence of inflation and they should not be described as an inflation hedge without qualification.