Fed Raises Rates for First Time Since 2023 as RBA Hike Looms

The US Federal Reserve raised interest rates for the first time since 2023, hiking its benchmark rate by a quarter-point to 3.75-4.0%. The move was seen as a sign that the central bank is actively leaning against inflation.

The Fed's updated projections showed most officials expect one more increase before the end of the year, with no hikes pencilled in for 2027. This change in approach has led to a broad tilt among major central banks towards keeping rates higher.

The Reserve Bank of Australia (RBA) is likely next, with markets pricing around an 80% chance of a rate rise on September 29th. The RBA's decision will be influenced by this week's jobs figures, which are expected to provide the last major data point before the decision.

Despite the rate hike, US shares held up over the week, with the S&P 500 finishing roughly flat and the Nasdaq rising. Bond yields also eased back a little, as investors were reassured by the Fed's indication that there would be only one more rate move this year.