Kevin Warsh leads Fed to hold rates, signals possible hikes

The Federal Reserve, under its new chair Kevin Warsh, kept the target range for the federal funds rate at 3.5 %‑3.75 % in a unanimous vote, marking the fourth pause this year and Warsh’s first policy decision. While the action was expected, the Fed’s post‑meeting projections showed a notable shift: nine of the 19 officials now foresee at least one quarter‑point increase before year‑end, and the committee’s “dot‑plot” signals a more hawkish stance than previously anticipated.

U.S. markets reacted modestly, with the dollar climbing to about R$ 5.16‑5.18 and the Nasdaq slipping 0.34 % after the announcement. Bitcoin fell roughly 2 % as investors priced in a tighter monetary outlook. In Brazil, the Central Bank cut the Selic rate by 0.25 percentage point to 14.25 % – the third consecutive cut – but signaled a softer inflation‑targeting horizon, moving the “relevant horizon” from Q4 2027 to Q1 2028. The move was read as dovish, prompting a brief rally in the local equity market and a widening of the yield curve for short‑dated contracts, while the real weakened against the greenback.

Globally, other major central banks continued their own policy adjustments: the Bank of Japan raised rates to 1 % (its highest in three decades), the Bank of England held at 3.75 % with a cautious tone, and the European Central Bank signaled further tightening. Ongoing Middle‑East tensions and higher energy prices kept inflation concerns high, influencing the Fed’s emphasis on price stability.