Fed Hikes Rates as Hawkish Turn Signals Higher Interest Rates Ahead

The US Federal Reserve has raised interest rates for the third time this year, but its decision has sent shockwaves through markets.

In a unanimous 12 to 0 vote, the Fed lifted its target range by a quarter point to between 3.75% and 4%, marking a hawkish turn in monetary policy.

The bigger signal for markets lay in the projections rather than the move itself.

The Fed's dot plot pointed to one more rise this year, followed by a prolonged hold near 4.1% throughout 2027, with only modest cuts to 3.6% by 2029.

UBS read the forecasts as the committee behaving as though a funds rate above 3.5% is needed to force inflation back to target.