Fed Raises Rates for First Time Since 2023, Dollar Surges

The Federal Reserve raised interest rates for the first time since July 2023, increasing the target range to 3.75%, 4.00%. This move was widely expected and came as a result of the Fed's efforts to combat high inflation. The median federal funds rate at the end of 2026 is now predicted to be 4.1%, up from 3.8% in June, with 16 out of 18 policymakers expecting at least one more rate hike by 2026.

The move was accompanied by a strong dollar, which rose above the key 100 level and remained there as of Friday's close. The yen, on the other hand, fell despite the Bank of Japan raising its policy rate to 1.25%, the highest level in 31 years. The decision was approved by a vote of 7 in favor and 2 against.

The Fed Chair emphasized price stability as the policy focus and attributed the recent rise in long-term U.S. Treasury yields to stronger economic conditions, increased capital spending by AI and mega-tech firms driving competition for funds, and global political risks.