In fact, real prices for energy and metals have been well above their long-term averages for more than 7 years, and real food prices are now at their highest level in 35 years (Chart 2). Throughout the current, decade-long boom, the scale of price increases has been higher, and the range of affected commodities broader, than in previous upturns.
Since 2002, prices for metals and grains have more than doubled, while crude oil prices almost quadrupled. The question is whether such strength will persist. The Bank’s view is that a large, sustained increase in demand is the primary driver of elevated prices. The breadth and durability of the commodity rally underscore this conclusion. Rapid urbanisation underpins this growth.