Nasdaq Gains 1.2% Before Fed Decision | Global Economy, Oct 28

On October 28, US equities experienced a surge before the Federal Reserve's decision, with the S&P 500 rising by 0.60% to 7,723. The Nasdaq showed even more optimism, jumping 1.18% to 26,478. This upward movement was driven by growth stocks, even as the 10-year Treasury yield surpassed 5% to 5.003%. Investors were hedging against a hawkish stance from the Fed, rather than anticipating a dovish turn.

The dollar index stood at 102.409, indicating imported inflation concerns for Brazil and pressure on the Brazilian real. The Federal Reserve's decision is expected at 14:00 ET, with markets anticipating a hold at 3.75%-4.00%. The primary concern is the statement and press conference, which could signal a higher-for-longer interest rate environment into December.

Such a development would have a significant impact on Brazil, as higher US yields would widen the rate differential and weaken the real. The Central Bank of Brazil closely monitors the Fed's inflation language, as imported fuel and food costs already complicate the Selic policy. Market sentiment, as reflected by the VIX, is relatively calm, with the index falling 4.73% to 17.52.

Any unexpected hints of a rate hike or stronger inflation language could trigger rapid adjustments across Latin America. Rising crude oil prices continue to fuel inflation expectations worldwide, from London to Brasília. The Bank of Canada has already warned that high oil prices could lead to a higher inflation forecast, putting the Fed in a similar predicament.

In China, industrial profits grew by 15.5% year-on-year in the first nine months of 2026, exceeding the 15.2% consensus, demonstrating resilient production despite slowing global demand. For Brazil, the Fed's message and the value of the dollar will play a crucial role in shaping the domestic economic landscape. A weak real, coupled with persistent price pressures, makes near-term Selic rate cuts more challenging to justify.

Polymarket, a crypto-based prediction market, currently prices the Federal Reserve's October decision at a 95.8% probability of no change and a 3.9% rise in interest rates. The market traded approximately US$83 million in these bets as of 12:18 a.m. ET, on October 28, 2026. The prediction markets serve as a live gauge of market sentiment, reacting quickly to inflation fears stemming from higher oil prices.

Gold, as a hedge against price pressure, has seen a 1.42% rise to US$4,063. Higher yields due to the anticipated hawkish stance of the Fed contribute to this rise. The strengthening of the dollar index to 102.409 raises the cost of imported goods and fuels, further putting pressure on the real and prompting Banco Central do Brasil to be cautious about cutting the Selic rate.

While markets expect a hold in interest rates at 3.75%-4.00%, the tone during the December meeting and the Fed's inflation language will carry more weight than the decision itself. Commodity exporters benefit from nominal income gains, but importers face higher costs for fuel and food, exacerbating inflation and squeezing household budgets across the region.

Brazil, in particular, will be closely watching the Fed's message and the movement of the dollar, as these factors will ultimately determine the real's fate. The article was produced by The Rio Times' automated newsroom system.