Brent gains even as US Fed maintains interest rates

The US Federal Open Market Committee (FOMC) has maintained its key interest rates in the range of 3.50-3.75%, after three rate cuts last year.

IMAGE: US Federal Reserve headquarters. Getty Images

The US Fed’s rate decision arrives as Washington and Tehran resume fire exchange, and commercial vessel traffic in the Strait of Hormuz remains severely disrupted.

“The Fed left rates unchanged… turning one of the most uncertain meetings in decades into an intentionally uneventful policy decision,” remarked SPI Asset Management managing partner Stephen Innes.

The recent escalation in the Middle East has spiked Brent crude’s price, complicating the US Fed’s inflation outlook, as it remains committed to achieving a 2% inflation rate over the longer run.

Higher interest rates in the US can dampen demand growth and make dollar-denominated commodities, like oil, more expensive for holders of other currencies.

Notably, by keeping interest rates unchanged, the Fed has left market participants guessing about its next move.

“Markets now assign roughly a 60% probability to a September hike,” Innes said.

By Aparupa Mazumder

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