Four-plus: a Fed rate hike could trigger a sell-off of U.S. government debt
Russia is less exposed to the direct impact of the Fed rate hike due to limited cross-border flows. But the country is not completely immune from the global financial shock: a strong dollar can put pressure on commodity prices and indirectly affect budget revenues. At the same time, the tightening of the US regulator's policy increases the risk of a new sale of US government debt from Japan — in the summer Tokyo was already getting rid of treasuries, supporting the weakened yen. In September, the Fed raised the rate for the first time in three years, increasing it to 3.75–4%. This happened despite the fact that six months ago Trump promoted his candidacy Kevin Warsh to the post of head of the regulator, hoping that the structure's policy would be softened. How the Fed's decision will affect the Russian Federation, the global and American debt markets is in the "Izvestia" material.
Why did the Fed raise the rate for the first time in three years
Following the meeting on September 15-16, the Fed raised the rate by 0.25 percentage points to 3.75–4% per annum. The regulator raised the indicator for the first time since July 2023. The decision was made unanimously, it coincided with the expectations of the market and economists — the probability of such an outcome was 91%.
Along with the rate decision, the Fed presented a new macro forecast for the coming years. The forecast for the end of 2026 has been raised to 4.1 from 3.8% in June, and to 4.1 from 3.6% in 2027. These are harsh estimates, which indicate that the rate is highly likely to be raised again this year.
According to the Fed, the decision to raise the rate was made against the background of steady inflationary pressure. The PCE price index grew by 3.7% year-on-year in June and July, with the regulator's target of 2%. Additional risks have been created by an oil price rise above $100 per barrel due to the conflict in the Middle East, an increase in US government debt above $40 trillion and an increase in ten-year treasury bond yields above 5%, the highest since 2007.
From a financial and economic point of view, the Fed's rate hike in such conditions is quite justified. It is unexpected from a political point of view. This is the first increase under the new chairman Kevin Warsh, who was proposed by US President Donald Trump. Trump criticized the previous head of the Federal Reserve, which acts as an independent body, for tightening monetary policy.
It was expected that the president's protege would coordinate the Fed's decisions with the White House. Nevertheless, the decision to raise the key rate in September was nevertheless made. The White House has already called this step annoying and unjustified. And Trump, on his Truth Social network, demanded that the rate be lowered to 1% or lower.
US President Donald Trump talks with Federal Reserve Chairman Kevin Warsh
Even though the head of the Fed is now the candidate recommended by Trump, the Fed remains a collegial body. The last decision was made unanimously, so Kevin Warsh is unlikely to be able to quickly change the planned path, says Andrei Smirnov, an expert on the stock market "BCS World of Investments".
On the other hand, the independence of the regulator may be imaginary, says independent expert Andrei Barkhota. It cannot be ruled out that this is a situational tool for the electoral cycle — a demonstration of the integrity of the US economic machine. After the midterm congressional elections in early November, Kevin Warsh may begin to act more decisively.
How will this affect the US national debt
The Fed's decision fits into a global regulatory turn towards tightening financial conditions, recalled Kirill Seleznev, an expert on the "Garda Capital" stock market. The Fed raised the bar after the European Central Bank, which raised its key rate by 25 bps on September 10 due to the inflationary impact of the conflict in the Middle East. The ECB's baseline forecasts for inflation in the eurozone remain above target (3% in 2026 and 2.5% in 2027), and the Bank of England is keeping the rate at 3.75% for now, but the logic of an increase may also follow. Together, this creates a global liquidity shortage: global financial conditions are becoming tougher, and borrowing costs are rising for both companies and governments.
The higher the rates in the economy, the stronger the currency. The tightening of the Fed's policy strengthens the dollar and creates pressure on the monetary units of other countries. However, this could ricochet US government debt, as it already happened in the summer, when the yen collapsed to multi-year lows against the backdrop of record divergence between the Fed and the Bank of Japan rates.
Then, saving the yen, Tokyo switched to aggressive currency interventions, financing them by forcing the sale of its main liquid reserve: in May-June alone, the Japanese portfolio of US government bonds decreased by almost $ 30 billion. The massive dumping of treasuries by Washington's largest external creditor increased pressure on the debt market, driving 10-year yields above 5% and forcing the US Treasury to take an extraordinary step — for the first time in 15 years, to conduct a coordinated intervention together with the Japanese authorities to stop the destabilization of the American borrowing market.
The danger lies not in the actions of Tokyo alone, but in the cumulative effect, Andrei Smirnov points out. The treasury market is already under pressure: the yield on 10-year securities is high, demand at auctions of the US Treasury is falling, and investors are massively getting rid of long issues. Against this background, even a three-fold increase in the purchase of bonds by the US Treasury has not yet been able to reverse the negative trend. At the same time, Andrei Smirnov emphasizes that costs for the US budget are gradually increasing: first of all, new loans and refinanced tranches are becoming more expensive.
As of September 2026, the total U.S. government debt has reached approximately $40 trillion. Its current ceiling is set at $41.1 trillion. Given the pace of government borrowing, it is expected that the United States will exhaust this limit and will be forced to raise the bar again in early 2027.
What does the Fed rate hike mean for Russia
For emerging markets, the strengthening of the dollar traditionally carries risks of capital outflow and subsidence of national currencies, Kirill Seleznev states. States with large amounts of foreign dollar loans and tight repayment schedules are under the greatest impact. Nevertheless, it is premature to talk about a frontal flight of investors from developing markets: the scale of the outflow will directly depend on the severity of the Fed's rhetoric at the next meetings and the determination of local central banks to protect their own markets.
The impact on the ruble exchange rate will be indirect, says Andrey Smirnov from "BCS World of Investments". Due to the restrictions on direct cross-border flows, a sharp weakening of the Russian currency against the dollar should not be expected.
— The strengthening of the dollar will be an argument in favor of lower commodity prices. However, energy resources still remain expensive amid a decrease in supply caused by the conflict in the Middle East. Metals were losing value at the time, but today they are actively recovering yesterday's losses," the expert added.
Despite the fact that Russia is minimally dependent on direct Fed decisions today due to the sanctions isolation, it is impossible to completely isolate oneself from global monetary shocks, the financial adviser and founder of Rodin emphasizes.Capital Alexey Rodin. The main channel of risk transfer remains the commodity market. A strong dollar makes a barrel more expensive for buyers outside the United States, which puts downward pressure on global oil prices. In theory, the oil and gas revenues of the Russian budget may be under attack, which are already under pressure due to the sanctions discount, the expert points out. However, this effect is currently being held back by the balance of supply and demand, as well as geopolitical tensions in the Middle East.
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