The US Federal Reserve delivered its first interest rate cut this year on 17 Sep, announcing a 25-basis-point cut to cushion a softening labour market. However, the committee now expects 2026 GDP growth and inflation to be higher, while anticipating the federal funds rate to be lower at the end of 2026: a dovish story that did not immediately support risk assets, with the M1 Brent futures down from a high of $68.70/bbl on 16 Sep to $67.60/bbl at the time of writing, despite a substantial 9.3mb drop in US crude oil inventories in this week’s EIA report (taking US crude stocks 20% below their 5-year average). Meanwhile, the US Dollar Index (DXY) saw support above 97. This mixed picture emerged from the “dot plot”, revealing a somewhat split committee: seven of the nineteen committee members expect no more cuts this year, and another two expect one cut. In contrast, a single member (likely new Trump appointee Stephan Miran) expects interest rates to decline by a whopping 1.25%, raising eyebrows about the Fed’s independence. In other news, President Trump highlighted his “very close” relationship with Indian Prime Minister Narendra Modi during a briefing in the UK on 18 Sep, but reiterated his stance on buyers of Russian oil, claiming the war in Ukraine would end if oil prices fell. Lower oil prices would also help President Trump add to his argument for lower interest rates (NOW!), perhaps adding to the eagerness. Overall, although oil prices have dipped over the past two days, increased tightness in the US alongside ongoing damage to Russian refineries may soften the landing. We recommend monitoring for support at $67/bbl with further support at the lower Bollinger band at $66/bbl.
