Most stocks rise as Fed hikes rates, signals drive to curb inflation

Asian traders welcomed the 25-basis-point interest rate hike from the Federal Reserve, viewing it as a sign of the bank's commitment to combat inflation. The decision, made unanimously, marked the first rate increase in three years, and Fed official Kevin Warsh signaled a hawkish tone, implying more hikes may be necessary. The move was driven by concerns over inflation, which has been too high for too long, as emphasized by Warsh.

Analysts noted that the Fed's decision strengthened the central bank's credibility and reassured markets about its determination to fight inflation. Long-term government bond yields fell as investors adjusted their inflation expectations, which currently stand at 3.4%, well above the bank's 2% target. The hike removed the immediate credibility question and prompted a debate on how much further tightening may be required.

However, some experts suggested that the chance of US policy rates returning to above five percent remains limited. Despite the hawkish stance, Fed Chair Warsh's optimistic outlook on the economy was seen as positive by many. The news also impacted oil prices, with Saudi Arabia moving to restore some capacity from a pipeline it had closed following drone attacks, sending crude prices down around three percent.

The Middle East crisis and the dollar's strength against its peers added to the mixed reaction from investors.