The Federal Open Market Committee lifted its target range for the federal funds rate by 25 basis points to 5.25–5.375%, marking the first increase since the 2023 tightening cycle.
The move was prompted by a June CPI reading: headline inflation hit 3.5% year‑on‑year, while core CPI rose to 3.6%, both far above the Fed’s 2% goal.
In the first five minutes after the announcement, the S&P 500 rose 0.6%, the Nasdaq up 0.4%, and the 10‑year Treasury yield slipped to 3.95%, reflecting markets’ mixed reaction to the tighter stance.
Fed’s dot plot shows 8 out of 9 officials now expect a 1.5% increase in the policy rate by 2025, signalling that the 25‑basis‑point move is the start of a broader tightening cycle.
Analysts predict the Fed will likely signal a 50‑basis‑point hike in the next meeting, while the Treasury market remains nervous; investors are now focused on the upcoming inflation report due next month.