At a Glance
Fed delivers its first rate hike in more than three years
Markets price in three more U.S. hikes
Goldman Sachs sees another Fed hike in October
BoE is expected to hold rates today
Sticky energy prices could put a November BoE hike back on the table
Fed’s surprise move raises the stakes for central banks worldwide
The Federal Reserve has sent a clear signal: inflation is still a problem. Kevin Warsh led the Fed’s first rate increase in more than three years, with policymakers presenting a united front on inflation and the central bank’s independence.
Key Details
Warsh avoided forward guidance and said he would not focus on any single economic data point. Markets, however, are already preparing for more tightening.
Futures are pricing in three additional Fed hikes, despite the Fed’s dot plot pointing to just one more increase this year. Goldman Sachs expects the next move could come in October, arguing that back-to-back hikes would help speed the return to the Fed’s 2% inflation target.
The move puts fresh pressure on the Bank of England, which is expected to keep rates unchanged on Thursday. Investors will closely watch the vote split and policymakers’ comments for clues about a possible November hike, especially as energy prices remain elevated.
Market Reaction
Short-term Treasury yields jumped to their highest level since mid-2024, while the dollar climbed to a seven-week high. The 10-year Treasury yield stayed below 5%, helping support Asian stocks.
European shares are expected to open 0.5% higher, while Nasdaq futures gained 0.6% and S&P 500 futures added 0.5%.
For traders, the focus is shifting toward how quickly central banks may need to respond to persistent inflation and supply shocks.
What to Watch Next
The BoE rate decision, final Eurozone August CPI, and U.S. weekly jobless claims are the key events ahead.
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Source: Reuters
Time: 2:30 PM EEST
