Oil prices fell on Thursday as traders weighed the Federal Reserve’s interest rate cut against lingering concerns over a slowdown in the US economy.

Brent crude futures dropped 30 cents, or 0.4%, to $67.65 a barrel by 09:37 GMT. US West Texas Intermediate (WTI) crude slipped 30 cents, or 0.5%, to $63.75 a barrel.

The Fed cut its benchmark rate by 25 basis points on Wednesday and signaled it would continue lowering borrowing costs gradually through the rest of the year in response to signs of labor market weakness. Lower borrowing costs typically support oil demand and prices.

Kuwaiti oil minister Tareq Al-Roumi said he expects demand for crude to rise following the Fed’s move, especially from Asian markets.

But other analysts were skeptical about any lasting boost. Jorge Montepeque, managing director at Onyx Capital Group, said: “They made this decision now because the economy is clearly slowing. The Fed is trying to restore growth.”

Fed Chair Jerome Powell noted that labor market risks are rising relative to inflation risks, though inflationary pressures still need to be monitored and managed.

The market was also pressured by persistent oversupply and weak fuel demand in the US, the world’s biggest oil consumer.

Data from the Energy Information Administration showed US crude inventories fell sharply last week as net imports dropped to a record low and exports surged to their highest in nearly two years. However, distillate stockpiles rose by 4 million barrels, far above expectations for a 1 million barrel increase, stoking concerns over demand in the US market and weighing on prices.

The US dollar saw choppy trading on Thursday as investors continued to digest the Fed’s cautious stance on further rate cuts, while attention shifted to the Bank of England’s upcoming decision, where no change in policy is expected.

Sterling slipped 0.1% to $1.3615, after climbing in the previous session to $1.3726, its strongest since July 2. The euro steadied at $1.1823, having retreated from a high of $1.19185 hit right after the Fed’s announcement, the strongest since June 2021.

The Fed cut interest rates by 25 basis points on Wednesday as widely anticipated, with Chair Jerome Powell describing the move as a “risk management cut” in response to labor market weakness, while stressing there was no need to rush into deeper easing.

Analysts were split on the Fed’s message: Goldman Sachs suggested Wednesday’s cut could mark the start of a series of reductions, while ANZ strategists argued Powell’s tone was “not dovish at all.”

Immediately after the decision, the dollar index dropped to 96.224, its weakest since February 2022, before rebounding sharply to end the day up 0.44% at 97.06.

Elliot Clarke, head of international economics at Westpac, said the Fed’s revised projections “highlighted the uncertainty that still surrounds the outlook,” noting that the expected timing and scale of cuts reflect ongoing inflation risks.

The Bank of England is widely expected to keep rates at 4% at Thursday’s meeting, with markets focused instead on the pace of quantitative easing reduction. Francesco Pesole, FX strategist at ING, warned that “any dovish surprise on QE could spark a sell-off in gilts and weigh heavily on sterling.”

Official data on Wednesday showed UK inflation rose 3.8% year-on-year in August, reinforcing expectations that no immediate rate cut is on the horizon.

Norway cuts rates for the second time in three months

The Norwegian krone showed little reaction after the central bank delivered a widely expected rate cut, its second in three months. Policymakers signaled further reductions are likely next year if the economy evolves as projected.

The euro trimmed earlier gains against the krone, last up just 0.1% at 0.86775.

Yen awaits Bank of Japan decision

The dollar edged up to 147.215 yen ahead of Friday’s BOJ meeting, with markets expecting no change in rates but pricing a quarter-point hike by March, with 50% odds of a move this year.

Investors are also watching the October 4 LDP leadership vote to replace outgoing Prime Minister Shigeru Ishiba, following the party’s heavy defeat in upper house elections.

New Zealand GDP contraction pressures NZD

Data on Thursday showed New Zealand’s economy shrank 0.9% in Q2 from the prior quarter, a worse-than-expected result that added to pressure on the RBNZ.

The weak data fueled bets on more easing, pushing the kiwi down around 1% to $0.5895, its lowest since September 8.

The Bank of England on Thursday published the voting details on UK interest rates at the conclusion of its September 18 meeting, showing seven members voted to keep rates unchanged, while two members voted in favor of a 25-basis-point cut.

The outcome diverged from market expectations, which had pointed to an 8–1 split in favor of holding rates steady.

• This vote is considered negative for the British pound.

The Bank of England on Thursday, September 18, decided to keep interest rates unchanged at 4.00%, the lowest level since February 2023, in line with market expectations.

This decision follows the previous meeting’s 25-basis-point cut, signaling a more cautious stance as policymakers assess economic conditions and inflation trends before considering further adjustments.