The roof is on fire; Fed raises rates for first time since 2023

The Federal Reserve on Wednesday hiked its key interest rate as widely expected, marking the first tightening of monetary policy since July 2023. Meanwhile, the central bank’s updated dot plot showed one more projected rate hike for the year.

The Federal Open Market Committee (FOMC) unanimously voted to raise the federal funds rate to 3.75%-4.00% from 3.50%-3.75%.

Separately, the new Summary of Economic Projections (SEP) predicted a median federal funds rate of 4.1% at the end of 2026, implying at least one more hike.

Coming into Wednesday’s decision, rate hike expectations had been steadily building, driven by soaring inflationary concerns due to spiking oil prices amid a widening conflict in the Middle East, a relentless rout in the U.S. bond market, and U.S. economic data that pointed to a combination of resilient growth, a strong labor market, and elevated inflation.