Brent rises even as US Fed holds interest rates steady

The US Federal Open Market Committee (FOMC) has maintained its key interest rates in the range of 3.50% to 3.75%, after three rate cuts in 2025.

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The rate decision comes against the backdrop of a full-blown Middle East conflict, after the US and Israel launched joint military operations in Iran – spiking oil prices and adding complexity to the US Fed’s inflation outlook.

“Uncertainty about the economic outlook remains elevated. The implications of developments in the Middle East for the U.S. economy are uncertain,” the US Fed said in a statement.

The US central bank has reiterated its commitment to achieving a 2% inflation rate over the longer run.

“Rising energy prices are dashing hopes of the Fed easing rates,” ANZ Bank’s senior commodity strategist Daniel Hynes noted.

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

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

“The market is pricing only one rate cut this year against earlier expectations of three rate cuts,” Hynes said.

By Aparupa Mazumder

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