Fed Hikes Rates for First Time Since 2023; Gold Prices Defy Trend
The U.S. Federal Reserve raised its benchmark interest rate by 25 basis points on September 16, 2026, marking the first increase since 2023. Despite the hike and hawkish signals from Chair Kevin Warsh, gold prices surged due to geopolitical tensions and strong institutional buying.
On September 16, 2026, the U.S. Federal Reserve announced a 25-basis-point increase in its benchmark interest rate, bringing the target range to 3.75% to 4.0%. This decision, made unanimously by the Federal Open Market Committee under Chair Kevin Warsh, represents the first rate hike by the central bank since 2023. The move aims to address inflation that remains above the Fed’s 2% target.
Following the announcement, market reactions were mixed. While traditional economic theory suggests higher rates typically dampen demand for non-yielding assets like gold, spot gold prices rose significantly in the subsequent days. On September 17, spot gold climbed to over $4,300 per ounce, and New York futures broke through $4,400 on September 18. Analysts attribute this counter-intuitive movement to factors such as geopolitical tensions, robust central bank buying, and inflows into exchange-traded funds (ETFs), rather than standard interest rate sensitivity.
Data from the World Gold Council indicates that global gold ETF holdings reached a record high of 4,189 tonnes in August 2026, with net inflows totaling $18 billion. Additionally, central banks and official institutions purchased a net 289 tonnes of gold in the second quarter of 2026, reflecting a 62% year-over-year increase.
Political and market responses to the Fed's decision have been sharp. President Donald Trump criticized the move, advocating for lower rates and stating that U.S. interest rates should be 1% or less. Meanwhile, financial markets adjusted to the new reality: the two-year U.S. Treasury yield jumped more than 10 basis points to above 4.74% following the decision, while the ten-year yield stood at 5.02%.
Looking ahead, the Federal Reserve signaled further tightening. According to recent projections, 16 out of 18 Fed policymakers anticipate at least one more quarter-percentage-point hike by the end of 2026. Although the initial hike was largely priced in by the market—evidenced by 85% of economists expecting an increase prior to the meeting—the accompanying hawkish guidance has reinforced expectations of continued monetary restraint.