Fed Hikes Rates, Ramps Up Pressure on Global Central Banks

The Federal Reserve raised interest rates by 25 bps for the first time in over three years, surprising markets and putting pressure on other central banks to follow suit. The move, led by Kevin Warsh, was seen as a hawkish turn by investors, indicating that the Fed is committed to fighting inflation.

Futures markets now price in multiple additional Fed hikes, with odds of a follow-up in October rising, according to Goldman Sachs and CME data. This has elevated pressure on the Bank of England, which is expected to hold rates steady today but may face calls for another hike due to sticky energy-driven inflation.

Central banks around the world are also expected to tighten policy by the end of the year, with the Bank of Japan set to lift its rate on Friday. The move has sent short-term Treasury yields surging and the dollar to seven-week highs, but longer-dated bonds have found relief in the Fed's commitment to inflation-fighting.