US central bank signals more rate hikes, boosting dollar’s best weekly performance since June

The Federal Reserve just reminded everyone who sets the tempo in global markets. On September 16, the FOMC voted unanimously to raise the federal funds rate by 25 basis points, pushing the target range to 3.75–4.00%. It was the first rate increase in more than three years, and Chair Kevin Warsh made clear it probably won’t be the last. The Bloomberg Dollar Spot Index climbed roughly 1.1% in the week through September 18, its strongest weekly showing since June. Futures markets quickly recalibrated, pricing in an approximately 87% probability of yet another quarter-point hike by December. What the Fed actually did, and why it matters Warsh described the hike as removing “a dose of accommodation.” The FOMC’s updated dot plot showed most policymakers expect at least one more increase before the year is out. Elevated rates are projected to persist well into 2027. The dollar’s resurgence and what’s driving it A stronger dollar is the most immediate market consequence, and it showed up fast. The 1.1% weekly gain on the Bloomberg Dollar Spot Index reflects a straightforward logic: higher US rates make dollar-denominated assets more attractive relative to alternatives in Europe, Japan, and...