US Fed raises rates to 3.75-4%: what it means for the rupee, gold and your loan

The US Federal Reserve raised its benchmark rate by 0.25 percentage points to a 3.75% to 4% range on Wednesday night Pakistan time, its first increase since July 2023 and the first move under new Fed Chair Kevin Warsh. All 18 policymakers backed it, and 16 of them expect at least one more quarter-point rise before the end of 2026, Reuters reported via Business Recorder.

The reason is oil. US consumer inflation was 3.4% in August, well above the Fed's 2% goal, as the Iran war pushed American petrol to $4.37 a gallon and diesel to a record $6.31, CBS News reported. The Fed now sees its preferred inflation gauge at 3.7% this year and does not expect it back at 2% until 2029.

How markets took it

• Dow Jones: down about 600 points (1.2%). The S&P 500 fell 0.4% and the Nasdaq slipped.
• US 10-year Treasury yield: above 5%, a level last seen in 2007, Yahoo Finance reported.
• Gold: down about 0.9% internationally.
• Bitcoin: up about 1.4% to near $76,500.
• Dollar: stronger across the board.

President Donald Trump responded on Truth Social by calling for rates "at 1%, or less".

What it means in Pakistan

The rupee. A higher US rate makes dollar assets more attractive and tends to pull money out of emerging markets. So far the rupee has held: our dollar rate page shows Rs 277.51 this morning against Rs 277.72 a day earlier. Pressure, if it comes, would show up over weeks, not overnight. Check any conversion in the currency converter.

Gold at home. Local rates track the international price. The 24-karat tola is Rs 449,314 today, down Rs 2,350 from yesterday, on our gold rate page. Higher US yields usually weigh on gold because it pays no interest.

Your loan and savings. The State Bank of Pakistan held its own policy rate at 11.5% on 14 September, even though August inflation jumped to 11.1%. Its next decision is due on 26 October. With the Fed now tightening and fuel still climbing, a cut in Pakistan looks further away. Car and home financing is priced off KIBOR, which stood at 12.30% for one year on our KIBOR page. Before you borrow, run the numbers in the car loan calculator or home loan calculator.

Remittances and freelancers. Families receiving dollars and freelancers paid in dollars are not hurt by a firmer dollar. If the rupee weakens, each dollar buys more at home.

The import bill. Pakistan pays for oil in dollars. A strong dollar on top of crude above $100 a barrel is the combination that feeds the daily petrol increases; petrol is Rs 391.22 today.

What to watch

1. US inflation data in October: another hot reading makes the next Fed hike more likely.
2. SBP on 26 October: whether it holds at 11.5% or responds to 11.1% inflation.
3. Oil: any reopening of Saudi supply routes would ease pressure on both central banks.