It has been argued that financial globalisation and, in particular, the scale and speed with which it has developed, has played a part in generating some of the excesses in financial markets which have crystallised over the past six months. However, there have also been other factors at work. I would like to turn now to comment on some of these.
The Bank’s view is that a large, sustained increase in demand (most notably in China) is the primary driver of this boom. With more than three-quarters of commodities above their longterm averages, the breadth and durability of the rally underscores this conclusion (Chart 5). This is not to say commodity prices will not continue to fluctuate, sometimes abruptly.