Fed officials have for months stuck to the mantra that they will only ease up on their hawkish drive when inflation comes down and remains subdued.
This has led many to warn that rates are unlikely to come down anytime soon, possibly as late as 2024, with a recession more than likely in the United States as well as other major economies.
DOLLAR EXTENDS RALLY
Other central banks are also meeting this week.
On Tuesday, officials in Sweden surprised markets by unveiling a one-percentage-point hike, while the United Kingdom and Switzerland are expected to announce more increases.
Asian markets were back in the red, reversing Tuesday’s bounce.
Tokyo, Hong Kong, Sydney and Manila were all down more than 1 per cent, while there were also losses in Shanghai, Seoul, Singapore, Wellington, Taipei, Mumbai and Jakarta.
Adding to the dour mood was Vladimir Putin’s announcement of a “partial mobilisation” as he upped the ante in his battle against Ukraine after his forces were routed from several cities in recent weeks.
He added that he would annex the territories his forces have already occupied and backed weekend referendums in four regions in Russian-held parts of Ukraine.
“We will definitely use all means available” to protect Russian territory, he warned, adding: “That’s not a bluff.”
The moves mark an escalation of the seven-month war, which has roiled markets and sparked an energy crisis.
Oil prices, which have wilted in recent months owing to worries about demand caused by any recession, surged more than 3 per cent.
The dollar, a safe haven in times of uncertainty and turmoil and which was already elevated ahead of the rate decision, rallied further.
The announcement and possible escalation in the war “raises a whole new set of uncertainties”, Rabobank’s Jane Foley said.
“This is set to weigh on the euro and on the currencies of eastern Europe.”