Traders price in 36 basis points of Fed tightening by 2026, overshadowing the Bank of England’s unchanged rate decision.
The British Pound slid 0.39% to $1.3234, its weakest level since April 7, as markets focused on the Federal Reserve’s hawkish outlook. The Bank of England held rates steady in a 7-2 vote, but Fed policymakers’ projections for potential rate hikes in 2026 dominated sentiment.
Nine of 19 FOMC members now expect at least one rate increase by 2026, while median inflation forecasts were revised to 3.6% for that year. The Fed also lowered its 2024 GDP growth estimate to 2.2% from 2.6%, with unemployment expected to remain stable.
US equities rose on AI-driven optimism and corporate news, despite the hawkish Fed shift. Initial jobless claims fell to 226K, slightly above estimates but improving from the prior 230K.