Markets seek recovery after Fed's 25 basis point rate hike

Global markets are seeking a new balance on the new trading day following the US Federal Reserve's (Fed) first rate hike since 2023. The Fed's decision to raise the policy rate by 25 basis points to the 3.75-4 percent range, in line with expectations, increased selling pressure on the New York stock exchange yesterday, while a more optimistic trend is being observed in futures today.

The Fed's decision statement emphasized that economic activity is growing at a solid pace, productivity growth remains strong, and capital investments remain resilient. It was noted that employment gains are progressing at the same pace as labor force expansion, and there has been no significant change in the unemployment rate. The fact that the decision was unanimous was also among the notable points in market pricing.

The Fed's inflation forecast for this year was raised from 3.6 percent to 3.7 percent. While the 2027 forecast was maintained at 2.3 percent, the 2028 expectation was revised from 2 percent to 2.1 percent. The inflation target for 2029 was set at 2 percent. The dot plot, which shows the interest rate expectations of FOMC members, revealed that 16 out of 18 officials expect at least one more rate hike this year.

Fed Chair Kevin Warsh stated that inflation data released over the summer did not show a significant improvement in underlying trends, noting that the rate hike was the right step toward achieving price stability. US President Donald Trump, following the decision, called for interest rates to be lowered to 1 percent or lower levels.

FED EFFECT ON MARKETS

With expectations strengthening that the Fed will maintain its tight monetary policy, the dollar index saw levels above 100 yesterday for the first time since August 4. While the index is trading sideways at the 100.3 level on the new day, the US 10-year bond yield is at 5.01 percent. The barrel price of November-delivery Brent crude oil traded sideways after falling 2.7 percent to 105.8 dollars yesterday. The ounce price of gold is trading at 4,287 dollars, up 0.5 percent.

The New York stock exchange closed the day with losses following the Fed's decision. The Dow Jones index fell 1.21 percent, the S&P 500 index 0.45 percent, and the Nasdaq index 0.01 percent. Concerns regarding the potential impact of high interest rates on credit growth and economic activity accelerated sales, particularly in bank stocks; JPMorgan Chase lost 1 percent, Bank of America 2.7 percent, Wells Fargo 3 percent, and Goldman Sachs 4 percent.

Index futures in the US started the new day on a positive note. News regarding progress on a bill aimed at regulating energy costs in data centers was cited as a factor in the rise, particularly in Nasdaq futures. On the macro data front, the fact that the 30-year mortgage rate in the US rose to 6.97 percent last week, reaching its highest level since May 2025, was also among the monitored topics.

In European stock markets, a positive trend stood out yesterday as the easing in oil prices and the reduction in selling pressure in the bond market took hold. While annual inflation in the UK rose to 3.1 percent, a five-month high, the market's focus has turned to the Bank of England's interest rate decision today. While the BoE is expected to keep its policy rate unchanged, the possibility of a rate hike at the November meeting is being evaluated due to rising inflationary pressures.

A mixed outlook prevails in Asian stock markets. Near the close, the Kospi index in South Korea rose 0.9 percent and the Nikkei 225 index in Japan rose 0.1 percent; while the Hang Seng in Hong Kong fell 0.7 percent and the Shanghai composite index in China fell 0.4 percent. The Bank of Japan's interest rate decision tomorrow is also being closely watched in the region.

Domestically, the BIST 100 index on Borsa İstanbul lost 5.54 percent yesterday, closing at 13,122.58 points. While the Dollar/TL finished the day yesterday with a 0.1 percent increase at 48.6560, it is trading at 48.6750 at the opening of the interbank market today. Analysts are monitoring 13,000 and 12,900 points as support and 13,300 and 13,400 points as resistance for the BIST 100.