Fed Decision Today to Determine Rate Hike Impact on Markets

The Federal Reserve is set to make its decision on interest rates at 2 PM ET today. Markets are pricing in a 25-basis-point hike to 3.75-4.00%, but what's being watched closely is the dot plot, which could signal sustained higher-for-longer rates.

A rate increase would be the first since July 2023 and would push mortgage rates above 6.75%. The June dot plot had the median rate at 3.8% for year-end 2026, but if the September median jumps above 4%, it could signal a sustained 'higher-for-longer' stance.

The global sovereign yields have surged in July, with Japan's 10-year yield jumping 27 basis points to 2.94%. This divergence between global bond stress and U.S. risk complacency is the widest gap in this cycle.