Hawkish Fed Hike Lifts Dollar Amid Rising Inflation Concerns

The Federal Reserve has raised interest rates by 25 basis points to 3.75-4.00%, marking its first hike since 2023.

The decision was unanimous, with 16 out of 18 officials expecting at least one more rate increase this year, according to the median year-end rate projection.

Markets initially absorbed the hike but turned sharply lower after Chair Kevin Warsh's press conference, where he emphasized that inflation remains too high and financial conditions are not restraining the economy.

The dollar surged 0.6% to a two-month high as higher short-term yields increased its appeal, while equities fell and Treasury gains reversed.