Fed Holds Rates at 3.75–4% in 10-2 Vote as Treasury Yield Breaks 5%

The US Federal Open Market Committee voted 10-2 on Wednesday to hold the federal funds target range at 3.75%–4.00%. The two dissenting members favoured a hike, reflecting internal disagreement over whether current policy is tight enough to bring inflation under control. The Fed's statement described economic activity as expanding at a "strong pace" and said inflation remains elevated — language that markets read as hawkish despite the absence of a rate move. The announcement pushed the 10-year US Treasury yield to 5.021%, a level that strengthens the dollar globally and raises borrowing costs for governments and businesses worldwide. Higher US yields put upward pressure on the dollar and limit room for easing in emerging markets, including Brazil, where the path for Selic cuts becomes harder when US rates stay elevated and the real faces additional pressure from domestic fiscal concerns. Prediction markets on Polymarket assigned a 77.5% probability to another Fed hike in 2026, with just over US$1.2 million — US$1,204,689 — traded on that outcome. On Thursday — the day after the Fed's decision — investors will also be watching the European Central Bank's rate decision, alongside US GDP and PCE inflation data and weekly jobless claims. The Bank of Japan's policy decision follows on Friday. Brent crude ended Wednesday at around US$110.35 a barrel, up 0.6%, keeping inflation concerns alive for central banks globally even as the US dollar index slipped to 102.139.