The dominant macro story overnight is the first FOMC decision under new Fed Chair Kevin Warsh, which delivered a hawkish shock: all 18 members voted unanimously to hold the federal funds rate at 3.50–3.75%, but the committee stripped its easing bias from a dramatically shortened 130-word statement, and nine of 18 officials now project at least one rate hike before year-end 2026, with six pencilling in two 25bp increases. The Fed's updated projections see PCE inflation surging to 3.6% by year-end against a backdrop of Middle East-driven energy inflation, with US CPI already running at 4.2% annually in May. Compounding the hawkish global backdrop, the ECB's first rate hike since 2023 takes effect today — lifting the deposit facility rate to 2.25% — as eurozone inflation accelerated to 3.2% in May, while the Bank of Japan held at 0.75% and the RBA maintained its cash rate at 4.35% with an explicit warning that further tightening remains possible.
The cross-asset reaction has been unambiguous: US equities sold off sharply on the FOMC outcome before partially recovering, with the S&P 500 finishing down 0.57% and the Nasdaq falling 1.15% as technology bore the brunt of rising rate expectations; the VIX edged up 1.3% to 16.41, signalling elevated but not extreme anxiety. Crude oil's 5.8% plunge to USD 76.05/bbl on Iran deal optimism provided some offset to inflation fears, though gold held firm near USD 4,331/oz on safe-haven demand and central bank buying. For Asia-Pacific markets opening today, the net effect is cautious — ASX futures were already flagging a 25-point decline at the open, ASX energy stocks face further pressure from the oil sell-off, and rate-sensitive sectors including REITs and consumer discretionary will remain under scrutiny as the Warsh Fed's hawkish pivot reprices the global rate path.