The Federal Reserve delivered a 25-basis-point rate hike on September 16, lifting its target range to 3.75–4.00% — its first increase since 2023 — with Chair Kevin Warsh issuing a hawkish dot plot signalling at least one further hike this year, citing inflation that remains too high. The Bank of Japan simultaneously raised its policy rate 25 basis points to 1.25%, its fastest tightening pace in over 30 years, while the Bank of England held rates but adjusted quantitative tightening plans, and ECB President Lagarde reiterated a meeting-by-meeting approach with no evidence of second-round inflation effects yet. Geopolitical risk in the Middle East, centred on the US-Iran conflict, had earlier driven Brent crude above $110, but reports of Saudi pipeline restoration and China privately urging Iran to rein in Houthi activity allowed oil to retreat for a third consecutive session, materially improving risk sentiment. The VIX fell sharply by 12.82% to 15.44, underscoring how quickly the macro narrative shifted from Fed-shock to relief rally once the rate decision was absorbed and energy supply fears moderated.
The cross-asset read for Asia-Pacific this morning is broadly constructive: easing oil prices reduce the inflation-shock premium that had weighed on regional equities, while the Nasdaq's 1.69% surge and the SOX chip index's 3.1% gain overnight provide a clear positive lead for technology-heavy markets. US 10-year yields held near 5.01% — elevated but stable — and the 2-year rate's 7-basis-point rise to 4.74% reflects the hawkish Fed repricing rather than fresh panic, limiting the drag on rate-sensitive sectors. For the ASX specifically, the relief rally is tempered by RBA Governor Michele Bullock's September 18 warning that upside inflation risks from Middle East oil, the AI boom, and weather events are materialising, with market pricing for a September 28–29 RBA hike now sitting at 93–95% probability — a domestic headwind that kept the ASX 200 to a modest 0.41% gain and its third straight weekly loss.