Fed Hikes Rates Amid Inflation Concerns

The US Federal Reserve hiked interest rates by 25 basis points at its September meeting on Wednesday, marking the central bank's first rate increase in three years. Fed Chairman Kevin Warsh emphasized that inflation has been 'too high ... for too long' and that the economy is strong enough to focus on price stability.

The US Dollar Index (DXY) reclaimed the 100.00 psychological level as traders assessed the Fed's decision, with markets pricing in a 49.8% chance of another hike later this year. The updated projections from the committee show that most Fed officials expect further tightening.

Meanwhile, the European Central Bank and Bank of England are set to make their own interest rate decisions on Thursday. The ECB has already raised rates by 25 bps last week and may not pre-commit to further steps, while the BoE is expected to leave its benchmark rate unchanged at 3.75%.

Gold prices rebounded above $4,300 after the Fed's decision, but could face headwinds from the central bank's commitment to fighting inflation. The precious metal has historically been sensitive to interest rates and monetary policy shifts.