US Federal Reserve hikes interest rates for the first time in three years
The US central bank raised its benchmark rate by .25 percent, with new Fed Chair Kevin Warsh defying President Donald Trump's desire for lower rates. Consumer banks and bond markets react. Also, OpenAI reveals new incidents of AI misconduct as fears grow that the technology could escape human control.
Commerzbank's FX Research team reports that the Federal Reserve is on a hawkish path into the end of the year, with a 25 basis point increase in the Fed funds target range to 3.75-4.00% and a probability of further rate hikes this year and beyond. The latest dot plot indicates that the median Fed funds projection for the end of 2026 has risen to 4.125% from 3.75% in June, suggesting another 25bp hike.
Sixteen out of 18 officials now expect at least one further rate hike this year. The Fed funds futures price a 51% probability of a 25bp hike in October and a total hike of 33bp by year-end. The Fed's decision to tighten policy is driven by tight conditions in the bond market, making a status quo riskier. The next Fed meetings are on October 27-28 and December 8-9, with the latter occurring just before the midterm elections.
The hawkish Fed rate hike is likely the main factor behind the Dollar's support, while AUD/USD gains strength and USD/JPY recovers from a brief dip.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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