Published:
Fed approves interest rate hike, signals one more to come this year
The Federal Reserve unanimously raises the federal funds rate by 25 basis points to a target range of 3.75%–4% and indicates another hike may follow, with updated projections showing higher near-term inflation and unemployment slightly lower.
The Federal Reserve unanimously raised the federal funds rate by 25 basis points to a target range of 3.75%–4%, describing inflation as still elevated and saying the policy action should support a timely return to its 2% goal. The committee framed the move as part of delivering price stability.
In addition to the immediate hike, updated projections suggest that a further increase later in the year remains a possibility. The article reports that the dot plot shows 16 of 18 participants expecting another hike, with four of those seeing the potential for two more, while two participants expected the policy to stop after one hike. It also notes that there are no increases pencilled in for subsequent years, with one cut indicated for 2028 and at least one for 2029.
The Fed also nudged up its inflation expectations for this year, with the headline personal consumption expenditures inflation rate at 3.7% and core excluding food and energy at 3.4%, each 0.1 percentage point higher than in June. The unemployment outlook was lowered to 4.1%, down 0.2 percentage point, and the committee is not expecting to reach its inflation target until 2029.
For FX traders, the key watch is how the Fed justifies “look through” versus persistence of energy-driven inflation, and how much the decision elevates market expectations for the path of rates and inflation over 2027–2029.
Why this matters for FX
The decision and the updated projections directly shape expected US policy rates and the inflation outlook. That feeds into US Treasury yields and global financial conditions, which can influence USD funding pressures and cross-currency pricing (especially against currencies where rate expectations or inflation persistence differ). The indication that another hike is possible also matters for longer-run rate expectations and risk premia.