DBA

A tariff increase could produce a one-off rise in the price level as the higher cost is passed through. Once absorbed, it stops adding to inflation.

A prolonged energy supply shock can keep delivering fresh cost pressure before the previous increases have even been absorbed. Crude reprices immediately, but the full impact takes months to work through the economy. Diesel, freight and processing costs rise. Higher natural gas prices feed into fertilizer. Inventories, contracts and crop cycles stagger the transmission into agriculture and food prices. The shock keeps working its way downstream long after the initial jump in crude.

The longer those cost increases keep arriving, the greater the risk that they feed into inflation expectations, wage demands and repeated price increases. That is how a supply shock can turn into persistent inflation. Once those expectations become embedded in wage and price setting, bringing inflation down becomes harder.

This is why I have said Warsh cannot keep rates unchanged indefinitely. The past two weeks have brought that constraint back into focus. His Jackson Hole speech put inflation at the center of the Fed's agenda. Friday's strong payrolls then pushed Treasury yields higher and strengthened expectations for another hike.

28.4 remains breakout support. While it holds, further upside remains in play. A sustained move back below 28.4 invalidates the breakout and returns DBA to its prior range.

DBA (Daily, as of 2026-09-04)