Fed Raises Rates, Signals More to Come; Global Stocks Slide as Geopolitics Heat Up

The Federal Reserve raised interest rates by 25 basis points in a unanimous decision, rebuffing calls from former President Donald Trump for cuts and indicating that another hike is likely in 2026. The move sent shockwaves through markets: stocks fell broadly while bonds rallied, with the US 10‑year Treasury yield trading near 4.99% as investors grew more confident that Chair Kevin Warsh will take a tougher stance to rein in inflation.

Global equity markets snapped back from recent complacency. Europe’s benchmark fell about 1.8% and major Japanese and Chinese indexes each plunged roughly 3% following the announcement. U.S. futures pointed to a 0.5% gain at the open, reflecting a tentative rebound as traders weighed the fallout. Brent crude eased roughly 2% to $103 a barrel.

The Fed’s hawkish tone reinforced expectations for tighter policy next year, pressuring risk assets even as bond markets cheered the central bank’s clarity on inflation fighting. The shift in yield dynamics—10‑year Treasuries near the 5% mark—heightens scrutiny on corporate financing costs and risk‑sensitive sectors, particularly technology and real estate.

The policy decision arrived amid escalating geopolitical tensions. President Trump threatened additional tariffs on the European Union should Canada be granted “Associate Member” status in the bloc, denouncing the potential move as hostile. Canadian Prime Minister Mike Carney is set to address the European Parliament today, a high‑profile appearance that could reshape transatlantic trade and diplomatic ties.

Economic data in Europe painted a mixed backdrop: Switzerland on Thursday doubled its 2026 GDP forecast to 1.7% from a June projection of 0.9%, while keeping its 2027 outlook at 1.6%, offering a rare bright spot for the region’s growth narrative.

With central banks tightening and geopolitical flashpoints multiplying, investors are bracing for greater volatility. Market participants will be watching upcoming economic releases and central‑bank commentary for clues on the pace of rate hikes and the durability of demand in a higher‑rate world.