The Fed’s 25bp hike to 3.75%–4.00%, alongside broad expectations for another increase, signals continued concern over persistent inflation and economic resilience. Chair Warsh’s reference to Middle East tensions also highlights geopolitical risks that could affect inflation, particularly through energy prices. Higher-for-longer rate expectations may support Treasury yields and the U.S. dollar while increasing valuation pressure on rate-sensitive assets. Markets will likely focus on incoming inflation, employment and economic data to assess whether further tightening is warranted.