Fed Holds Rate Steady, HKMA Follows as Markets Slump and Bond Yields Surge

The U.S. Federal Reserve kept its benchmark interest rate unchanged at 3.5% to 3.75% on Wednesday, marking the fifth consecutive meeting without a change. The decision came despite some dissents among policymakers, as inflation remains persistent. Hours later, the Hong Kong Monetary Authority (HKMA) followed suit, maintaining its base rate at 4%, as required by the city's currency peg to the U.S. dollar. The announcements rattled financial markets. The Dow Jones Industrial Average plunged 1,152 points on Wednesday, reflecting investor disappointment that the Fed is not taking stronger action against inflation. Meanwhile, the bond market signaled growing unease: the yield on the 30-year U.S. Treasury bond surged to its highest level since 2007 during a press conference by Federal Reserve Chairman Kevin Warsh. Warsh, who took over the Fed earlier this year, faced sharp criticism from investors who find his communication style too sparse and his commitment to fighting inflation uncertain. Market participants are demanding more decisive rate hikes and clearer guidance, but Warsh's bare-bones approach has left them doubting his resolve. The Fed's next policy meeting is scheduled for September.