Oil gains after US Fed cuts interest rates

The front-month ICE Brent contract has inched $0.20/bbl up on Wednesday to settle at $73.39/bbl, after the US Fed cut interest rates for the final time in 2024.

PHOTO: Getty Images

In a largely anticipated move, the US Federal Open Market Committee (FOMC) cut its key interest rate by 25 basis points, bringing the central bank’s benchmark rate to a range between 4.25-4.50%.

This was the third and final interest rate cut of the year, according to the US central bank.

In November, the Fed 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.

Lower interest rates in the US can boost demand growth for dollar-denominated commodities like oil as it makes the greenback weaker against other currencies.

Looking ahead

Despite yesterday's interest rate cut, the US Fed has hinted that further interest rate cuts in 2025 might be scarce, according to market analysts.

“[Fed] officials might achieve a balanced policy with fewer rate cuts [in 2025] than currently anticipated,” SPI Asset Management managing partner Stephen Innes said.

By Aparupa Mazumder

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