Federal Reserve rate hike: One and done?

In this Market Week in Review (MWIR), Russell Investments’ Director and Senior Portfolio Manager Alex Cousley examines the Federal Reserve’s latest interest-rate hike and what it could mean for U.S. monetary policy, government bonds and global equity markets.
The discussion looks beyond the headline rate increase to the underlying inflation picture. Wage growth and housing remain relatively subdued, suggesting today’s inflation environment looks different from 2021 and 2022 and reducing the likelihood of a prolonged Federal Reserve hiking cycle.
Alex also examines the outlook for the Bank of England, continued weakness in Chinese credit demand and why Russell Investments’ cycle, valuation and sentiment framework still points to a constructive backdrop for global equities.

Key takeaways:
• The Federal Reserve raised rates, with one more hike expected before a prolonged pause
• U.S. inflation pressures look different from 2021 and 2022, supporting a gradual disinflation outlook
• Resilient earnings and neutral investor sentiment continue to support the equity market backdrop

Questions answered:
Why did the Federal Reserve raise interest rates?
Inflation has picked up, partly due to higher energy prices, prompting the Fed to tighten policy. However, underlying wage and housing pressures remain relatively contained.
Will the Fed keep raising rates?
Russell Investments expects another rate increase may occur before the end of 2026, followed by a prolonged pause as inflation gradually moderates.
Are U.S. government bonds attractive?
Higher yields have improved valuations in U.S. government bonds, although investor sentiment has not yet reached levels that would suggest a strong tactical buying opportunity.
Why is China’s economy slowing?
Weak property markets, subdued consumer confidence and limited appetite for business investment are contributing to softer household and corporate credit demand.
What is supporting global equity markets?
Resilient economic activity, robust corporate earnings, improving profit margins and neutral investor sentiment continue to provide a constructive backdrop.
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Date of first use: September, 2026