US interest rates have risen in response to persistent inflation

Sources: BLS, Fed, MSCI, Macrobond.

• Inflation and rates: US annual inflation as measured here by the consumer prices index (CPI) has risen this year, in part due to higher fuel costs amid supply constraints. Against this backdrop, the US Federal Reserve (Fed) increased its benchmark interest rate by 25 basis points in September 2026. The US Federal Reserve (Fed) targets a 2% level of inflation over the long run.
• Markets try to anticipate change: Treasury yields and risk assets respond to new inflation and activity data, as well as reacting to changing expectations of the monetary policy path, often before the Fed acts. This can cause short-term volatility in equity and bond markets.
• Recent impact on markets: Long-term Treasury prices have fallen and yields have risen steeply; in part this was because inflation stepped up and the Fed has signalled a tighter monetary policy stance. Equities have remained relatively resilient as the market does not currently expect significant hikes, like those of 2022–2023. At its September meeting, Fed policymakers anticipated just one further rate rise in 2026.
• Your clients’ portfolios: Higher yields could create long-term return opportunities within the bond asset class, though further rate rises, as well as changing market expectations and data releases could still lead to volatility. Interest-rate risk tends to be highest in longer-duration bonds. Portfolios diversified across asset classes, different bond durations, styles and regions may be better placed to navigate changing expectations and other potential sources of volatility.