The US Federal Reserve’s two-day policy ended with a 25 basis point hike on Wednesday, which would mark its first rate increase since July 2023. The central bank’s decision to raise benchmark lending rates by 25 basis points came as no surprise to equity investors. The move was heavily priced into the market and aligned perfectly with the CME FedWatch tool, which had shown a 92.9% probability of a quarter-point hike heading into the meeting.
The Fed Chair noted that recent economic trends have shown little evidence that inflation is slowing to target levels, emphasizing that policymakers are focusing on broad trends rather than noisy individual data points. His comments indicated that the Federal Open Market Committee (FOMC) is preparing for a prolonged hawkish cycle, requiring persistent efforts to drag inflation back to its medium-term target of 2%.
The outcome and Fed Chair Kevin Warsh’s commentary could have significant implications for global bond yields, the US dollar, capital flows and emerging-market currencies and equities, including the Indian rupee and D-Street.
