Oil plunges after US Fed maintains interest rates

The front-month ICE Brent contract declined by $1.03/bbl on Wednesday to settle at $61.12/bbl, after the US Fed maintained interest rates at its latest policy meeting.

IMAGE: US Fed headquarters. Getty Images

In a largely anticipated move, the US Federal Open Market Committee (FOMC) held its key interest rate steady at a range between 4.25-4.50%.

The news follows mounting tensions among global trade partners amid the ongoing US tariff dispute and growing concerns over demand. It has put some downward pressure on Brent crude’s price, according to market analysts.

The decision was “widely expected,” VANDA Insights’ founder and analyst Vandana Hari remarked.

Higher interest rates in the US can dampen global oil demand as it makes dollar-denominated commodities like oil costlier for holders of other currencies.

“The Fed signalled that rates will likely remain on hold until the effects of tariffs become clearer,” two analysts from ING Bank noted.

In December last year, the Fed had cut its interest rate by 25 basis points. The cut was supported by the US central bank’s latest inflation reading, which is gradually approaching its 2% target, it said.

By Aparupa Mazumder

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