Fed Hikes Rates for First Time Since 2023; Brazil Cuts Selic to 13.75%

The Federal Reserve raised its policy rate by 25 basis points on Wednesday to a 3.75%-4% range, the first increase since July 2023, citing persistent inflation driven by surging energy prices and Middle East conflict. The decision was unanimous, and Chair Kevin Warsh said inflation remains "too high for too long." The Fed's updated projections point to at least one more hike this year. U.S. stocks reversed early gains to close lower, with the Dow Jones falling 1.21% to 51,461.90 and the S&P 500 down 0.45%. The 10-year Treasury yield touched 5%, its highest level since 2007.

Hours later, Brazil's Copom cut the Selic rate by 25 basis points to 13.75%, the fifth consecutive reduction. The unanimous decision matched market expectations, with 94.5% probability priced in. The committee noted gradual moderation in economic activity, particularly in cyclical sectors, while inflation slowed to 4.22% over 12 months after August's 0.32% monthly deflation. However, the Copom left future moves open, citing external risks from Middle East tensions, oil volatility, and El Niño.

“Inflation is too high and has been for too long”

The Ibovespa fell 0.51% to 185,547.66 points, pressured by Petrobras and Vale, while the dollar slipped 0.07% to R$ 5.1514. Brent crude dropped 2.69% to $105.83 a barrel after Saudi Arabia signaled additional supply. The IBC-Br economic activity index fell 0.22% in July, worse than the 0.1% decline forecast, reinforcing expectations of a slowing Brazilian economy.

Asian markets traded mixed on Thursday as investors digested the Fed's hawkish stance. The MSCI Asia-Pacific index rose 0.4%, while Japan's Nikkei gained 0.5%. China's blue-chip stocks fell 0.4% and Hong Kong's Hang Seng declined 0.9%. U.S. equity futures pointed to a firmer open, with Nasdaq futures up 0.6%.