Brent steady after ECB cuts interest rate

Brent's price found some support after the European Central Bank (ECB) cut its key interest rate by 25 basis points.

PHOTO: European Central Bank's headquarters in Frankfurt, Germany. Getty Images

In a move that was largely anticipated, the ECB cut its key interest rate to 3.50% at the bank’s 26-member rate-setting council meeting yesterday.

A 25-basis points rate cut was “expected and largely priced in,” analysts from Saxo Bank noted. “The ECB meeting holds significant weight for markets as it shapes monetary policy, directly affecting interest rates and investor sentiment,” they added.

This news has led oil market participants to anticipate a similar move from the US Federal Reserve (Fed) at its Federal Open Market Committee (FOMC) meeting next week.

The price of Brent crude is expected to gain strength as lower interest rate in the US can make the greenback weaker against other currencies and boost demand growth for dollar-denominated commodities like oil.

“As [oil] markets inch closer to the Fed's much-anticipated rate cut, the chances of a more aggressive move have ticked up,” SPI Asset Management’s managing partner Stephen Innes remarked.

The US Fed will hold meetings on 17 and 18 September to discuss its policy measures, where an initial rate cut is widely anticipated. The Fed has kept its benchmark interest rate within the 5.25-5.5% range for over a year now.

By Aparupa Mazumder

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