Commodity inflation is hot, but Fed is still focused on core inflation

Of course, the Iran conflict has changed the oil story in 2026: low oil prices were a big talking point for the White House in bringing inflation down when Trump became president, as he believed once oil prices went down, everything would go with it. Now, six months into the conflict, oil prices are elevated and we are in a more dicey short-term position. For a while, every oil rally was sold before making another new high, and that had been going on for months. Now this chart doesn't look good to me, and we are getting closer to the midterms. Diesel prices had been heading lower after the big burst in January to a recent low in July, but have now shot higher again. The Fed is very mindful of diesel prices because of their impact on food prices as they go into the input cost of transporting, harvesting and storing food. This has been a big theme among hawks: the conflict can make inflation stickier going forward. Of course, with energy prices up, heating oil prices have also gone up, so when the Fed says they're seeing energy prices embedded into the economy, this is what they're looking at. On top of energy prices ramping up, copper prices have blown up to an all-time high. Of course, copper goes into a lot of things in the U.S., so the timing of this breakout isn't great either as the Fed is deciding whether they should hike rates to address these supply shocks and the cost of doing business in America has gotten more expensive. With all the above happening during inflation week, the 10-year yield this morning, as I write this, is at 4.80% — even with headlines about the conflict and commodity prices up. A lot has already been priced into the 10-year yield, and the Fed is still debating whether to hike rates at their meeting next week, which, to me, means that the Fed hasn't really gotten aggressive in fighting inflation. These rate hikes are insurance rate hikes if inflation doesn't improve. Today, a lot of those rate hikes are already priced into the 10-year yield. I discussed the last labor report and how everyone should be thinking about that and rates with Editor in Chief Sarah Wheeler on this episode of the HousingWire Daily podcast.