Overview
- The Federal Reserve raised its policy rate by 25 basis points to a 3.75–4.00 percent target range on Wednesday, the first increase since 2023.
- Fed officials signalled that the move is unlikely to be isolated and that at least one more 25 basis-point increase could come before the end of 2026 because underlying inflation remains elevated.
- Markets had largely priced in the step so reactions were muted: US stock indexes were mixed, Treasury yields moved higher and the dollar strengthened, which hits richly valued growth stocks and long-duration bond funds.
- President Trump publicly criticised the decision and repeated calls for much lower rates, while Chair Warsh publicly defended the Fed's independence and its focus on price stability.
- The move is reverberating globally as the Bank of Japan raised its key rate to 1.25 percent and investors flagged risks from more than $40 trillion in US government debt and rising long-term yields for portfolios and bond funds.