Fed Hikes Rates, Dollar Surges as Markets Bet on Inflation Containment

Global markets saw a mixed reaction to the Federal Reserve's decision to raise interest rates for the first time in over three years. The move, which was widely expected, saw the US dollar reach a seven-week high against its major peers.

The Fed raised interest rates by a quarter point, but the unanimous decision tilted towards a more hawkish stance, with the board signaling one more rate hike this year. Goldman Sachs now expects the Fed to hike rates again in October, citing a 50% chance of an additional hike as soon as next month.

The Treasury yield curve bear flattened, with short-term maturities taking a hit but long bonds experiencing relief. The US dollar's surge was underpinned by a jump in short-term Treasury yields, which rose to their highest since July 2024.

Commodity markets took a hit, with oil prices giving back ground. Brent crude futures slipped 0.7% to $105.05 a barrel after falling 2.7% overnight as Saudi Arabia was reportedly offering crude cargoes through Oman, easing some concerns about Middle East supply disruption.