Copper Prices Plummet as Rate Hike Odds Surge to 85%

Copper prices have retreated in recent days after surging to record highs just weeks ago. The metal's price on the London Metal Exchange (LME) fell following a hotter-than-expected US inflation reading, which boosted bets of Federal Reserve rate hikes.

The Consumer Price Index (CPI) rose 0.4% month-over-month and 3.4% year-over-year as of September 11. Core CPI, excluding food and energy prices, increased by 0.3% on the month. This has led to a significant increase in the probability of a Federal Reserve rate hike at the upcoming FOMC meeting, with market-implied pricing indicating around 85-88%.

The higher interest rates expected from the Fed will strengthen the dollar, making dollar-denominated commodities more expensive for international buyers. This will likely reduce demand for copper, particularly from China, which is the world's largest copper consumer. A stronger dollar effectively raises the price tag for Chinese buyers, potentially leading to softer import demand.