Dollar climbs to four-month high after Fed raises rates and signals more to come
The dollar index rose 0.53% to 100.19, its highest level since 31 July, after the Federal Reserve's rate decision.
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The Federal Reserve raised its benchmark rate by 25 basis points to a range of 3.75% to 4%, a unanimous 12-0 vote. Traders had largely expected the move, having priced in a 95% chance of it beforehand.
The dollar index still rose 0.53% to 100.19, its highest level since 31 July, as attention shifted to what officials signalled for next year. Of the committee, 12 members see rates at 4.1% by the end of 2026, four see 4.4% and two see 3.9%.
Officials described the economy as expanding at a solid pace even as inflation stays elevated. Fed governor Kevin Warsh said too many inflation categories are still running above 3% and that the central bank's predominant focus remains price stability rather than the labour market.
The dollar's jump reflects a hawkish hold and forward guidance that traders have read as keeping rates higher for longer than they had expected. The projections showing most officials anticipating only a modest move down by 2026, paired with Warsh's emphasis on persistent price pressures, point to sustained dollar strength. That is neutral to slightly supportive for the currency but weighs on equities and commodities priced in dollars, since it locks in a higher rate path than markets had been pricing before the decision.