Spanish markets opened on edge after the Federal Reserve raised interest rates by 25 basis points, moving its target range to 3.75%-4%. The first hike since 2023 comes as the IBEX 35 and the euro face pressure from weeks of losses and global uncertainty. The Fed cited persistent inflation and strong labor market data as reasons for the move. Traders had largely expected the decision ahead of the meeting.
The IBEX 35 closed at 19,555.90 points on September 15, ending a month in which the index dropped more than 2%. Trading has yet to start for the day, and investors remain cautious. The Fed's hawkish stance is likely to weigh on Spanish equities, especially banks and cyclical stocks, which are more sensitive to tighter financial conditions. Bolsa de Madrid notes that these sectors are particularly exposed during periods of aggressive monetary tightening.
Eurostat reported that core inflation in the eurozone reached 2.4% year-on-year in August, remaining above the European Central Bank's target.
Currency markets are also unsettled. Before the Fed's announcement, the euro traded near 1.1534 against the dollar, just above its monthly low. Institutional investors have increased their net short positions in euro futures, signaling little faith in a quick rebound. The euro's weakness is compounded by the European Central Bank's rate hikes. The ECB raised its deposit rate to 2.50% as of September 10, 2026.
Eurostat is set to release August inflation data for the eurozone, with forecasts pointing to an annual rate of 3.3%, up from 2.9%. Policymakers and investors will watch the figure closely because it could influence the ECB's next moves. Updated ECB projections show inflation averaging 3.0% in 2026. The bank projects 2.5% in 2027 and 2.1% in 2028, suggesting it will remain alert to price pressures.
In the UK, the Bank of England is preparing its own rate decision. Markets expect no change from the current 3.75%, but the Central Bank's cautious tone is keeping the British pound in focus and adding to uncertainty for European assets. The Bank of England's Monetary Policy Committee says holding the rate steady reflects ongoing concerns about inflation in the UK.
CME FedWatch put market-implied probabilities of a 25 basis point US rate hike as high as 90% ahead of the Federal Reserve's decision, reflecting strong inflation and employment data. This heightened anticipation contributed to increased volatility across global markets.
In the US, two more data releases are expected: the Philadelphia Fed manufacturing index and weekly jobless claims. Both will shape expectations for further rate moves before the end of the year. BBVA Research says the Fed's latest projections point to a more restrictive path than markets had expected, with a median PCE inflation rate of 3.7% for 2026 and GDP growth at 2.3%, partly due to investment in artificial intelligence. Unemployment is forecast to stay at 4.1% through 2029.
Markets have priced in a 50% chance of another 25 basis point hike before year-end. Investors in Spanish stocks and European bonds face a session marked by uncertainty, as currency markets also respond to shifting rate expectations. US monetary policy and eurozone inflation add to the uncertainty surrounding decisions from the UK Central Bank.
As noted in a previous investigation, sudden changes in global policy can have immediate and sometimes unexpected effects on Spanish markets. New data and policy decisions make vigilance impressive.
Investors and policymakers in Spain are watching for the next move. central banks show no sign of easing, while inflation remains high, leaving Spanish markets unlikely to see relief soon. The IBEX 35 remains vulnerable and the euro weak as uncertainty around global rates continues to shape the outlook for anyone exposed to Spain's financial sector.
