Fed Hikes Rates; Stocks Sink, Dollar Surges
Fed Hikes Rates; Stocks Sink, Dollar Surges
The News
The Federal Reserve raised interest rates by a quarter percentage point on Wednesday to keep pressure on inflation, and Wall Street sold off in response.
The move lifted the overnight federal funds rate to a target range of 3.75%-4.00%. The decision was unanimous.
Policymakers' updated median projection points to one more hike before the end of the year, with rates then held steady through 2027.
US stocks and bonds fell after the announcement, while the dollar surged and Treasury yields rose.
The Numbers
Size of the hike: 25 basis points. New target range: 3.75%-4.00%. Median projection: one additional hike in 2026, then no change through 2027.
Timeline
The Federal Open Market Committee raises the overnight funds rate by a quarter point in a widely anticipated, unanimous decision, and signals another hike could come this year. Stocks and bonds are sold off in the hours that follow; CNBC reported the decision spurred a market sell-off.
Newsquawk's US market wrap, published by ZeroHedge, describes the meeting as hawkish overall, with the door left open to further action.
US stocks and bonds are still lower and the dollar has surged, according to Newsquawk's Asia-Pac open note.
Sentiment recovers somewhat after the FOMC, but the dollar index and Treasury yields hold on to their gains.
US stock index futures rise, with Reuters reporting the hike removed a long-standing source of market anxiety. The UK's FTSE 100 advances. CNBC put futures as little changed.
Reactions
Reuters framed the hike as a relief for equities: the Fed reaffirmed its focus on taming inflation and, in doing so, lifted an overhang that had hung over the market for some time. US stock index futures rose on Thursday morning.
The market-desk read carried by ZeroHedge was harsher, calling the FOMC hawkish overall and noting the committee left the door open to further action — with stocks and bonds sold and the dollar bid.
CNBC noted the quarter-point increase was widely anticipated and that the Fed signaled another hike could come this year.
What's Next
The Bank of England's rate decision was due later Thursday, and Reuters reported market attention had already turned to it.
For the Fed, the median projection in its updated forecasts points to one more increase before the end of 2026, then a hold through 2027 — making incoming inflation and spending data the main thing to watch. US retail sales came in strong, and import and export prices were hotter than expected.
More
The same market wrap flagged other moves in the session: Saudi Arabia was reported to be looking to resume half of a key oil pipeline within days, Iranian foreign minister Abbas Araghchi offered optimistic commentary, and US officials met with the Houthis. Apple was reported to be considering a return to the server market and to have spoken with Nvidia about using its networking technology.
Poll
Was the Fed right to hike rates again?
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