Fed Hiked: One small step?

Key arguments

• The FOMC raised rates 25bps to a 4.00% upper bound unanimously, the first hike since 2023, citing inflation that is too high and has been for too long.
• Banxico is expected to hold at 6.50% for a long time and avoid forward guidance, even if the Fed hikes another 25bps, unless exchange-rate moves become unhinged.
• Brazil's BCB gives few clues on the pace of cuts; the terminal Selic rate is 10%-12% under a shallow fiscal adjustment and 7%-9% under a robust one.
• Mexico's growth is improving, with GDP seen at around 1.4% in 2026 versus 1.0% in 2025, but even an optimistic 2.0% would not close the negative output gap.

Corresponding source evidence

1. “The plain fact isthat inflation istoo high and has been for too long.” -Fed Chair Kevin Warsh ► In its September meeting, the Federal Open Market Committee (FOMC) increased its policy rate by 25bps to an upper bound of 4.00% in aunanimous decision ,raising rates for the first time since 2023. · 2023
2. ACROSS THE AMERICAS 2 US Week In Review In its September meeting, the Federal Open Market Committee (FOMC) increased its policy rate by 25bps to an upper bound of 4% inaunanimous decision, raising rates for the first time since 2023. · 2023
3. We thought this outcome was the path ofleast resistance and though this move will do very little toactually address inflation, itwill buy the FOMC time tosee ifthe higher-than-expected print inAugust was just abump inthe road or something more worrisome.