Key facts
- The Federal Reserve raised interest rates by 0.25% to a range of 3.75%-4.00%.
- Most Fed policymakers expect at least one more rate hike by the end of 2026.
- The Fed cited persistently above-target inflation and a strengthening economy.
- US retail sales rebounded sharply in August.
- The US House of Representatives passed a bill to increase economic pressure on Russia.
The Federal Reserve implemented its first interest rate hike in over three years on Thursday, raising the benchmark rate by a quarter percentage point to a range of 3.75%-4.00%. The move, which was unanimous, was accompanied by signals of further tightening to come, with most Fed policymakers projecting at least one more hike by the end of 2026. Fed Chair Kevin Warsh cited persistently above-target inflation and recent signs of a strengthening economy as justifications for the decision.
While the rate hike was largely anticipated, the Fed's messaging was perceived as slightly more hawkish than expected. The policy statement indicated the move would "support a timelier return" to the 2% inflation target. Fed funds futures suggest a roughly 50% probability of another hike at the central bank's October meeting.
In response to the Fed's decision, short-dated Treasury yields rose, while longer-dated yields nudged lower. The 10-year Treasury yield fell below 5%, and the 30-year yield remained near a 19-year high. Wall Street futures indicated a higher open for stocks on Thursday.
In other news, US retail sales rebounded sharply in August. The US House of Representatives passed a bill aimed at increasing economic pressure on Russia over its invasion of Ukraine. Meanwhile, oil prices extended losses, and fighting escalated between Saudi Arabia and Yemen's Iran-backed Houthis.