Fed raises rates by 25 bps in first hike since 2023

The Federal Reserve has raised its benchmark interest rate by 25 basis points to 3.75%–4%, delivering its first increase since July 2023 as inflation and energy costs remain elevated.

Summary

• The Federal Reserve unanimously raised its benchmark rate by 25 basis points to 3.75%–4%.
• New projections show 16 of 18 officials expect at least one more increase in 2026.
• Bitcoin briefly approached $76,000 after the widely expected decision.
• Oil above $100 and hot August inflation data helped build the case for higher rates.

Fed rate hike receives unanimous FOMC support

The Federal Reserve said the Federal Open Market Committee voted unanimously to lift the federal funds target range from 3.5%–3.75% to 3.75%–4%.

All 12 voting members supported the increase, giving Fed Chair Kevin Warsh a united decision at his first policy meeting to produce a change in interest rates. The committee had voted 9–3 to leave rates unchanged at its July meeting.

Policymakers said inflation remained elevated and described the increase as a step that would support a more timely return to the Fed’s 2% target. Officials also said domestic spending had remained resilient while productivity growth and capital investment stayed strong.

The latest statement removed previous language that linked inflation mainly to supply shocks. According to analysts cited by Reuters, the change suggested that officials were paying more attention to persistent price pressures rather than treating recent inflation as a temporary result of disrupted supplies.

During his press conference, Warsh said the committee would “deliver price stability.” The pledge came after annual headline consumer inflation climbed to 3.4% in August, while core CPI increased 0.3% from July and 2.4% from a year earlier.

Producer prices also came in above forecasts before the meeting. Components of the PPI report that feed into the Fed’s preferred personal consumption expenditures price index led economists to expect firmer August PCE inflation.

Fed projections point to another increase in 2026

The Fed’s economic projections showed that 16 of 18 policymakers expect at least one additional quarter-point increase before the end of 2026. Only two officials projected no further change from the new range.

Warsh did not submit an individual rate projection, according to Reuters. The median forecast places the federal funds rate at 4%–4.25% at the end of 2026 and at the same level at the end of 2027.

Goldman Sachs Asset Management global fixed-income chief Kay Haigh told Reuters that the projections did not indicate the start of an aggressive tightening cycle. Haigh said one more increase in December was the firm’s base case, although incoming inflation readings and energy prices would influence the decision.

The projections correct the original report’s claim that 12 of 18 policymakers expect another increase. Current figures show 16 officials anticipate at least one more move.

Prediction-market traders also expect another increase during 2026. Polymarket contracts cited in the original report placed the probability of two quarter-point hikes during the year at 69%, including the increase announced Wednesday.

Traders showed less confidence in an immediate follow-up move. The platform assigned a 62% probability that the Fed would leave rates unchanged after its next meeting, placing more attention on December as the possible date of another increase.

Oil and inflation strengthen the case for higher rates

Energy prices became an important part of the policy backdrop after renewed conflict in the Middle East disrupted supply routes and pushed Brent crude above $100 per barrel.

Ahead of the Fed announcement, Brent traded near $108 after gaining 2.9% during the previous session. Oil later fell about 0.6% after reports that Saudi Arabia was offering additional cargoes through Oman, according to Reuters market data.

Higher energy costs raised concerns that fuel and transport prices could keep headline inflation above the Fed’s target. Rate increases cannot restore disrupted oil supplies, but the central bank can use tighter financial conditions to prevent energy-driven price gains from spreading through consumer demand, wages and other parts of the economy.

Bond markets had already adjusted to the inflation risk. The benchmark 10-year Treasury yield reached 5% before the decision, its highest level since 2007, while traders assigned a probability of more than 92% to a quarter-point increase.

As crypto.news previously reported, the market fell before the announcement, with total cryptocurrency capitalization declining more than 2% to about $2.6 trillion. Bitcoin dropped below $76,000 as traders prepared for higher U.S. borrowing costs.

Following the announcement, the two-year Treasury yield rose about 3 basis points to 4.693%. The 10-year yield slipped 1 basis point to 4.985%, while the 30-year yield fell 3 basis points to 5.331%.

The U.S. dollar index gained 0.5% to 100.18. Stock moves remained limited, with the S&P 500 up 0.2% and the Nasdaq gaining 0.7% shortly after the decision, according to Reuters.

Bitcoin approaches $76,000 after the Fed decision

Bitcoin traded between roughly $75,000 and $75,800 around the announcement before briefly advancing toward $76,000. The modest rise followed a rate decision that futures traders had almost fully priced in.

Earlier technical coverage found that Bitcoin defended $76,000 after falling to an intraday low of $75,605 and then recovering toward $76,900. Liquidation clusters sat near $75,000 on the downside and between $77,600 and $78,500 above the market.

The cryptocurrency remained under pressure after losing around 4% during the previous U.S. session. More than $540 million in bullish crypto positions were liquidated over 24 hours, while U.S.-listed spot Bitcoin exchange-traded funds recorded over $450 million in net outflows on Sep. 15, according to data reported by Reuters.

Higher Treasury yields can place pressure on Bitcoin and other risk assets because U.S. government debt offers investors increased returns without the volatility associated with cryptocurrencies. A firmer dollar can also raise the cost of dollar-priced assets for investors outside the United States.

Monetary policy was not the only source of selling. A separate report on the vote showed that the Senate’s CLARITY Act cloture motion received 50 votes to 49, leaving it 10 votes short of the 60 required to open debate.

The procedural defeat prevented the chamber from considering amendments or holding a final vote on the digital-asset market structure bill. The proposal sought to divide federal oversight of cryptocurrencies between the Securities and Exchange Commission and the Commodity Futures Trading Commission.