Recent research has shown that economic conditions have an important effect on real
commodity prices. We quantify the contribution of fluctuations in inflation to this particular
link. In the data, a temporary rise in inflation causes real commodity prices to rise, as does a
rise in trend inflation. We find that a simple dynamic equilibrium model of commodity
supply and demand gives a realistic response of real commodity prices to inflation. Based on
historical simulations, shocks to inflation played an important role in commodity price
dynamics during the 1970s, but they have contributed negligibly to commodity price
movements since then.