Rate Hikes Across Globe as Fed and BOJ Act to Combat Inflation

The US Federal Reserve has raised interest rates for the first time since July 2023, by 25 basis points to 3.75%-4.0%. This move was unanimous among Fed policymakers and is in line with their projections of another rate hike before year-end. Fed Chair Kevin Warsh emphasized that 'inflation is too high and has been for too long'.

Elsewhere, the Bank of Japan raised its benchmark interest rate by 25bp to 1.25%, a 31-year high, citing concerns over inflation breaching the bank's 2% target. The Bank of England, however, kept interest rates on hold at 3.75%, but warned that further increases may be necessary if energy costs persist.

The global bond market is also experiencing weakness, with US 10-year yields climbing above 5% for the first time since July 2007. Japan's benchmark 10-year bonds saw their highest yield in 30 years at around 3.04%, and Germany's 10-year Bund yields surpassed 3.5%, a level not seen since June 2009.