Fed Hikes Rates to 4% as UK and Japan Follow Suit
The US Fed raised rates by 0.25% to 3.75-4%, with the BOE and BOJ also signaling tight policy amidst sticky inflation.
Key points
- The Federal Reserve raised rates by 0.25% to 3.75-4.0%, with a majority forecasting further hikes.
- The 10-year US Treasury yield settled at 5.0%, while UK 10-year gilts fell to 5.30%.
- Brent crude oil prices retreated to $102 per barrel after briefly approaching $110 mid-week.
The Federal Reserve raised interest rates by 0.25% to a range of 3.75-4.0%. This is the first increase since 2023 and aligns with a hawkish shift.
Market reaction remained muted as global equities held steady in local currency. Sterling-denominated returns showed a modest 0.8% weekly gain.
US Bond Yields Hit Key Level
The 10-year US Treasury yield settled exactly at 5.0%. This psychological threshold reflects persistent pressure on fixed-income markets.
UK 10-year gilt yields fell to 5.30% during the week. Investors priced in a 0.9% return for the period.
Inflation Data Drives Policy Stance
US headline inflation stands at 3.7% against a 2% target. Core inflation remains elevated at 3.3%, prompting the Fed’s action.
UK headline inflation edged up to 3.1% in August. Core rates held steady at 2.6%, suggesting wage pressures remain contained.
Global Energy Prices Remain Volatile
Brent crude spiked near $110 per barrel mid-week before retreating. It closed at $102 as Strait of Hormuz flows stabilized.
Diesel prices in the UK are testing the £2.00 mark. Reduced Russian refining output is a key driver of this surge.
