Fed Lifts Rates 25 Bps; Markets Price Three More Hikes Through 2027

The Federal Reserve raised interest rates by 25 basis points after a unanimous vote at the Federal Open Market Committee (FOMC), lifting the target range for the federal funds rate to 3.75%–4.00%. The move marks the first rate increase since July 2023. The latest dot plot indicates that 16 officials see at least one additional hike by 2026. The median policy-rate projection for both 2026 and 2027 stands at 4.1%. Fed Chair Jerome Powell said recent readings point to a strong U.S. economy and a resilient labor market, while inflation remains too high and has persisted for too long. He added that the committee is not yet confident inflation is moving toward its 2% goal, stressing that inflation—not growth—remains the central economic challenge. Powell also attributed the rise in U.S. Treasury yields mainly to solid U.S. economic performance, intensified competition for capital, and geopolitical factors. Market moves between the rate decision and Powell's press conference were sharp: spot gold fell about $100, the U.S. dollar index rose roughly 40 points and pushed above 100, the 2-year Treasury yield climbed around 10 basis points, and the 10-year yield added about 5 basis points. U.S. equities broadly turned lower. Futures markets are currently pricing in about 33 basis points of additional tightening this year and roughly 75 basis points of cumulative hikes by June next year.