Why is the Federal Reserve raising interest rates?

The Fed hiked by 25 basis points as expected, bringing the Fed Funds rate to 3.75%-4.00%. This move follows strong economic data and the Chair's recent inflation rhetoric.

The key uncertainty is whether this is a singular hike or the start of a series. The Summary of Economic Projections show slightly higher growth and inflation forecasts for this year, with a downward revision to the unemployment rate for 2026. The dot plot now indicates one more hike this year and a median expectation of one hike in 2027, though markets price in more.

Global central banks are also tightening, pushing yields higher. Investors should consider locking in current yields with limited duration risk and diversifying across global public and private markets.