Oil prices found support from Fed chair's rate cut remark

Brent futures gained some support this week, after the US Federal Reserve’s (Fed) chairman Jerome Powell affirmed that an interest rate cut in September is “on the table.”

PHOTO: Getty Images

The US Fed maintained its key interest rates at 5.25%-5.50% during its two-day Federal Open Market Committee (FOMC) meeting that concluded on 31 July. It also noted “some further progress” toward the central bank’s 2% inflation goal.

The US central bank considers the performance of personal consumption expenditures (PCE) price index to analyse the progress towards achieving its 2% inflation target. The PCE price index rose 2.5% in June.

After the two-day meeting, Powell told a press conference that a September rate cut is possible, provided the inflation data continues to be supportive. This news has supported Brent futures, according to market analysts.

“The broad sense of the committee is that the economy is moving closer to the point at which it would be appropriate to reduce our policy rate,” Powell said. “If that test is met, a reduction in our policy rate could be on the table for as soon as the next meeting in September,” he added.

The Fed will meet next on 17-18 September to discuss the country's monetary policy.

Lower interest rates in the US tend to make the greenback weaker for non-dollar holders, which in turn could support demand growth for dollar-denominated commodities like oil.

Powell's remarks boosted a cheer in the global oil market and supported prices, VANDA Insights’ founder and analyst Vandana Hari remarked.

By Aparupa Mazumder 

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