The Fed Pulled the Trigger. Who’s Next?
At a Glance
- Fed raises rates for the first time in over three years, under new chair Kevin Warsh
- Vote was unanimous – a signal aimed straight at markets
- Traders now bet on three more hikes this year; Fed’s own forecast shows just one
- Goldman Sachs says October hike is coming
- Dollar hits 7-week high, short-term Treasury yields highest since mid-2024
- BoE decides today, BoJ expected to hike Friday
The Fed’s move just raised the stakes for every central bank on the planet this week.
Kevin Warsh was brought in to cut rates. Instead, his first move as Fed chair was a hike, and the whole committee backed him on it.
What happened
The Fed delivered its first rate increase in more than three years, unanimously. Warsh gave no forward guidance, but markets aren’t buying the “one and done” story. Futures are pricing three more hikes this year, well above the Fed’s own dot plot, which shows just one. Goldman Sachs is already calling for another hike in October.
Market reaction
Short-term Treasury yields jumped to their highest since mid-2024, pushing the dollar to a seven-week high. Longer bonds actually rallied on the inflation-fighting signal, with the 10-year yield staying under 5%. Asian stocks rose, and European and U.S. futures pointed higher.
Why it matters
This puts real pressure on the Bank of England, deciding today, and the Bank of Japan, expected to hike Friday to a 31-year high. Traders now expect the U.S., Europe, UK, Australia and New Zealand to all tighten again before year-end.
What to watch
The BoE decision, final August Eurozone CPI, and U.S. jobless claims – all landing today.
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Source: Reuters
