The most important news of the past two weeks remains the aggressive rate cuts by the Federal Reserve, which has lowered its federal funds target by 1.25% in an eight day period.

The most obvious beneficiaries of the move are the debt and equity markets. Near-term interest rates are falling and the easing of longer-term rates has sparked a new round of mortgage refinancing. Equity markets are rising on hopes that the lower rates will help the financial services industry repair its damaged balance sheets, hurt by the subprime problems.

However, the aggressive policy easing also significantly affects the commodity markets as well. By making it obvious that the Federal Reserve will try to prevent the economy from suffering a recession, and indicating it will accept the risk of rising inflation, investors are flocking to commodities as a way to protect their portfolios from the scepter of inflation.

Gold prices held near the $935 per ounce level, up over $80 per ounce since the emergency rate cuts of Jan. 22. Platinum prices reached new records this week, helped by the easy monetary policy in the U.S. and persistent power outages in South Africa which reduced mine output there. South Africa and Russia are the two largest producers of platinum.

OPEC concluded its meeting this week and decided to keep production quotas steady. Although oil prices have been hovering in the high $80s to the low $90s, the cartel feared that slowing global economic growth could cut demand.

Thus, raising production into falling demand could bring a sharp drop in oil prices, which, apparently, OPEC wants to avoid. It is also worth noting that the second quarter is traditionally a weak demand period, which added to the cartel's decision to hold supplies steady. Unfortunately, oil prices at these levels tend to weaken global growth so the decision to hold production steady may not prevent oil prices from falling on their own accord.

The Baltic Dry Freight index, which measures the cost of shipping dry freight (corn, cement, scrap iron, etc), has been falling since making a peak in mid-November. The index, which is a proxy for overseas commodity demand, is down 45.1 percent from its peak. However, it did edge higher this week, as shippers begin to take advantage of lower freight rates to export grains. For example, wheat exports sales jumped 20 percent this week compared to last week. Sales are up 66 percent since June 1 compared the same period a year earlier.

Walt Breitinger is vice president of commodities at A.G. Edwards and Sons. He can be reached at (219) 738-6460.