Federal Reserve hikes rates 25 bps, signals more tightening ahead in 2026

The Federal Reserve unanimously approved a 25 basis point rate increase to 3.75%-4.00%, its first hike since July 2023, driven by inflation concerns and a resilient U.S. economy. Fed Chair Kevin Warsh signaled that at least one more rate increase is expected before year-end 2026, adopting a hawkish tone that defied calls from President Trump for monetary easing.

The decision triggered broad market weakness, with the 10-year Treasury yield climbing above 5% for the first time since 2007, the highest level in nearly two decades. Equity and commodity markets extended losses as investors repositioned for a "higher for longer" rate environment.

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