Fed’s decision to keep interest rates unchanged slows Brent's momentum

The US Federal Reserve (Fed) kept its interest rates unchanged in the range of 5.25-5.50% at its two-day meeting that concluded yesterday.

PHOTO: The US Fed's headquarters in Washington, US. Getty Images

Brent's price came under pressure as the US Fed policymakers' decision to keep interest rates at elevated levels have raised concerns about demand for dollar-denominated commodities such as oil.

The anticipation of prolonged higher interest rates is expected to pose challenges for risky assets, including the oil market, according to ANZ Bank’s senior commodity strategist Daniel Hynes.

Meanwhile, the central bank's officials maintained their expectations for three interest rate cuts this year. They also projected three rate cuts for 2025, down from four announced earlier.

The US Fed is likely to implement its first quarter-point rate cut in June, followed by further cuts over the remainder of the year, SPI Asset Management’s managing partner Stephen Innes said. The central bank’s “underlying outlook is bullish,” commented Price Futures Group’s senior market analyst Phil Flynn.

Lower interest rates tend to boost oil demand growth as it improves risk appetite for dollar-denominated commodities like oil.

However, “the market appears to be more focused on what the Fed may do this year,” said two analysts from ING Bank.

By Aparupa Mazumder 

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