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US Fed Meeting: FOMC hikes interest rate for the first time since 2023
US Fed Meeting: Federal Reserve on Wednesday approved its first interest rate hike in more than three years and indicated another to come, as part of an effort aimed at combating inflation
US Fed Meeting: Federal Reserve on Wednesday, 16 September, approved its first interest rate hike in more than three years and indicated another to come, as part of an effort aimed at combating inflation. The Fed’s FOMC voted 12-0 to raise rates by 25 basis points, taking the target range to 3.75%-4%.
As mentioned above, the US Fed meeting started on 15 September 2026 and will conclude on 16 September 2026. The 12-member committee will announce its decision on the interest rate at 11:30 PM (IST). So, Indians may tune in to US Fed chair Kevin Warsh's speech, expected to begin around 11:30.
The US Central Bank has held US Fed rates steady since January 2026, choosing to wait to gauge the effects of energy price shocks and to let the impact of tariffs on prices ripple through the economy. However, in the previous US Fed meeting, a quarter of the voting members called for an immediate US Fed rate hike, dissenting from the other nine voting members. Hence, the market is expecting a rate hike in the September meeting. Amid persistent inflation concerns, the market is pricing in a 25 BPS rate hike. If it happens, this would be the first US Fed rate hike since 2023, when Kevin Warsh's predecessor, Jerome Powell, led the central bank's post-pandemic hiking campaign.
According to CME's FedWatch tool quoted by AFP, the data fuelled market expectations of a rate hike at this week's meeting, with investors giving it a probability of more than 92%.
Higher yields mean everyone from the U.S. government to households to businesses must pay more in interest to borrow money, which slows the overall economy.
They also make people less willing to pay high prices for stocks because they can earn more from sitting in bonds, which are considered safer investments.
The markets are pricing a better than 90% chance of a 25 basis-point hike from the US Fed, Bloomberg reported citing swaps data.
“Market turmoil is to be expected across all asset classes if Warsh fails to hike rates,” Caroline Mauron, co-founder of Orbit Markets told the publication. She added that inflation concerns could revive the debasement trade, which is positive for Bitcoin, but “bond yields mayhem and general market volatility will probably take it down first before it goes up.”
Cryptocurrencies are under pressure today after the US Senate did not pass a contested Clarity Act regulatory bill. Industry sentiment is on the down low as watchers now await a potential interest-rate hike from the Federal Reserve. Inflation fears, soaring US bond yields and higher interest rates could further damp demand for risk assets like Bitcoin.
Bitcoin stabilized at around $75,900 in early New York trading after falling as much as 5% in the previous session. The broader cryptocurrency market remained following steep declines a day earlier, Bloomberg reported.
Notably, most watchers believe the US Fed is set to hike interest rates today. However, this would come against the backdrop of continued pressure from US President Donald Trump for the opposite action.
Trump was at loggerheads with Fed Chair Kevin Warsh's predecessor Jerome Powell on the issue. He argued that sharply lower borrowing costs could help unleash a significant economic expansion, putting his preference for easier monetary policy at odds with the Fed's rate-setting approach.
Impact from the likely Fed rate hike could be particularly relevant as hyperscalers announce massive spending plans to expand AI infrastructure.
For households, the combination of higher borrowing costs and elevated energy prices could further squeeze budgets. This could weigh on consumer demand if households have less disposable income available for spending.
A rate hike from the Fed could put more upward pressure on US Treasury yields, which are already hovering near multi-decade highs. Higher yields typically translate into increased borrowing costs across the economy, adding pressure on consumers already dealing with elevated energy prices and higher import costs amid ongoing trade tensions.
The move could also reinforce the recent sell-off in global bonds, as investors demand greater compensation for inflation risks and rising government debt levels.
Besides the rate decision, investors are also expected to focus on Fed Chair Kevin Warsh's post-decision remarks for clues on the inflation outlook and the likely path of interest rates.
Nominated by US President Donald Trump earlier this year, Warsh took over from Jerome Powell in May amid expectations from the current administration that the central bank would move to lower interest rates.
The money markets in the US are expecting the central bank to raise rates, pricing in a more than 90% chance of a quarter-point rate hike. Further, they are also pricing in another hike by December.
If the rate hike is announced today, it would mark the Fed's first-rate increase in over three years — the last time being on 26 July 2023, when it increased the target range by 25 basis points.
The Fed initially held rates at that level before beginning a series of cuts, with the most recent reduction coming in December 2025.
The United States Treasuries were largely flat trade today ahead of the Federal Reserve's latest interest-rate decision and updated economic projections. Traders are on wait and watch to place fresh bets on the path of monetary policy.
Notably, the relative stability in yields comes after Treasury markets faced pressure in recent weeks as rising crude oil prices and persistent inflation concerns raised expectations around the Fed's interest-rate path.
Precious metals, which are highly sensitive to interest-rate movements, have witnessed sharp volatility throughout 2026 after enjoying a record-breaking year.
Profit-taking at the start of the year, coupled with rising inflation, has weighed on the appeal of gold, dragging prices to a five-month low at one point.
The escalation in tensions between Washington and Iran has pushed crude oil prices higher, in turn raising expectations that the Federal Reserve and other central banks could keep interest rates higher in response to persistent inflationary pressures
Higher interest rates could make gold and silver less attractive to investors, encouraging a shift towards interest-bearing assets such as US Treasuries.
Gold and silver are non-yielding assets, while a rate hike could also boost demand for the US dollar as overseas investors seek higher returns from US assets.
A stronger US dollar could further weigh on precious metals by making them more expensive for holders of other currencies.
Meanwhile, it remains to be seen how long gold prices can continue to draw support from central-bank purchases, which have slowed in recent months.
Gold prices were trading with mild gains in trade, supported by a weaker US dollar as traders awaited the US Federal Reserve's policy decision later in the day.
Spot gold was up 1.3% at $4,347.91 per ounce after touching a more than one-month low on Monday.
US gold futures for December delivery rose 1.3% to $4,388.80. In the domestic market, the near-month futures contract on the MCX edged higher by ₹1,040 per 10 grams to ₹1,51,850.
Precious metals, which are highly sensitive to interest-rate movements, have witnessed sharp volatility throughout 2026 after enjoying a record-breaking year. Profit-taking at the start of the year, coupled with rising inflation, has weighed on the appeal of gold, dragging prices to a five-month low at one point.
Axis Capital said the RBI was likely to remain on hold in October despite upside risks to inflation, with a rate hike currently expected in December. However, it noted that a US Fed hike could force the RBI to act earlier in October.
Axis Capital also said the Fed decision had emerged as a key trigger, with markets assigning a 92% probability to a Fed hike at the time of its report, although the brokerage did not consider a hike its base case. It added that a Fed move could increase pressure on the RBI to tighten policy.
The brokerage further noted that fiscal support could strengthen the case for tightening. While tightening during an adverse energy shock can hurt growth, it may become necessary if temporary price shocks turn into persistent, broad-based inflation, particularly when fiscal policy is cushioning the impact.
Going ahead, market direction is likely to remain sensitive to the Federal Reserve’s policy communication and meeting minutes, with a hawkish stance potentially keeping pressure on equities through higher yields and a stronger dollar, while a dovish tone could support risk sentiment and encourage further upside.
The US rate decision comes at a sensitive time for Indian markets. A rise in US Treasury yields above 5% could make emerging markets such as India less attractive to foreign institutional investors (FIIs), which have already sold more than ₹14,400 crore worth of Indian stocks over the past two weeks.
The immediate rate hike itself may not come as a surprise to markets, according to V K Vijayakumar, Chief Investment Strategist at Geojit Investments, who said the bigger focus would be on the Fed’s assessment of the economic outlook and its future policy direction.
“In today’s meeting, the Fed is most likely to raise interest rates by 25 bp. However, this is unlikely to impact the market since it is already discounted by the market. More market-moving will be the Fed commentary,” V K Vijayakumar, Chief Investment Strategist at Geojit Investments, said.
A Fed hike could strengthen the dollar, put pressure on the rupee, push bond yields higher and contribute to near-term volatility in Indian equities. However, much of the move may already have been factored into market prices, putting greater emphasis on the Fed’s forward guidance.
Investors will therefore be watching whether the rate increase is presented as a one-off response to inflationary pressures or the beginning of a more sustained tightening cycle.
A Federal Reserve rate hike could put further upward pressure on US Treasury yields, which are already hovering near multi-decade highs. Higher yields typically translate into increased borrowing costs across the economy, adding pressure on consumers already dealing with elevated energy prices and higher import costs amid ongoing trade tensions.
The impact could be particularly relevant as hyperscalers announce massive spending plans to expand AI infrastructure. For households, the combination of higher borrowing costs and elevated energy prices could further squeeze budgets. This could weigh on consumer demand if households have less disposable income available for spending.
A rate hike would also come against the backdrop of continued pressure from US President Donald Trump for lower interest rates. Trump has argued that sharply lower borrowing costs could help unleash a significant economic expansion, putting his preference for easier monetary policy at odds with the Fed's rate-setting approach
If the rate hike is announced today, as widely expected, it would mark the Fed's first rate increase since 2023. The last time the Federal Reserve raised the federal funds rate was on July 26, 2023, when it increased the target range by 25 basis points. The Fed initially held rates at that level before beginning a series of cuts, with the most recent reduction coming in December 2025.
With the rate decision now in focus, investors are also expected to closely watch Fed Chair Kevin Warsh's post-decision remarks for clues on the inflation outlook and the likely path of interest rates.
Warsh was nominated by US President Donald Trump earlier this year amid expectations from the Trump administration that the Fed would move towards lower interest rates.
US Treasuries remained largely flat in Wednesday's trade, September 16, as traders awaited the Federal Reserve's latest interest-rate decision and updated economic projections before placing fresh bets on the path of monetary policy.
The US 10-year Treasury yield, a benchmark for mortgage and auto loan rates, was little changed at 5.004%, a day after reaching its highest level in 19 years.
The 2-year Treasury note yield, which is more sensitive to the Federal Reserve's short-term interest-rate policy, was also unchanged at 5.409%. Earlier this month, the yield reached its highest level since July 2024.
Yields on 30-year Treasuries were similarly flat at 5.372%. The relative stability in yields comes after Treasury markets faced pressure in recent weeks as rising crude oil prices and persistent inflation concerns raised expectations around the Fed's interest-rate path.
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