The Federal Reserve concluded its two-day policy meeting on Wednesday, leaving interest rates unchanged and indicating that there will be one cut in 2024, with more cuts following the next year and beyond. Earlier on Wednesday, just prior to the Fed's announcement, new inflation data showed a notable slowdown in consumer price increases for May, in the clearest indication that inflation is cooling.
Consumer prices rose 3.3% in the year through May, showing a slowdown in inflation.
Oil prices were ticking up on Wednesday, with both Brent crude and the U.S. benchmark crude oil gaining nearly 1% as of shortly after the conclusion of the Fed meeting.
At 2:43 p.m. ET, Brent was trading up 0.84% at $82.61, while West Texas Intermediate (WTI) was trading up 0.78% at $78.51, for a 0.61-cent gain on the day. The Fed has been struggling with the determination of whether inflation is truly cooling enough to meet the central bank's goal of 2% before implementing interest rate cuts, and the first quarter of this year had created significant hesitancy.
At the close of the first-quarter of this year, the Federal Reserve indicated that policymakers were largely expecting interest rates in the U.S. to be cut to 4.6% this year, 3.9% in 2025 and 3.1% the following year.
The European Central Bank started cutting interest rates last week, and Canada has followed suit. The ECB's recent interest rate cut, its first since 2019, marked a significant effort to tackle inflation. Following this, Denmark's central bank also lowered its benchmark interest rate by 25 basis points to 3.35%. The ECB cited progress in reducing inflation, which fell to 2.6% in the eurozone from 10% in late 2022.
JP Morgan economists had predicted that the Federal Reserve would cut rates once or twice this year, and three times next year.
By Charles Kennedy for Oilprice.com
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