Fed Lifts Rates as Tariffs, Energy Shock and AI Investments Fuel Inflation, by Bogdan Maioreanu

Commentary by etoro analyst for Romania, Bogdan Maioreanu

Fed Lifts Rates as Tariffs, Energy Shock and AI Investments Fuel Inflation

The US Federal Reserve raised interest rates by 0.25% on Wednesday night. It is the first increase since June 2023. The FOMC voted unanimously, and prospects suggest another rate hike by year-end. With markets repricing the prospect of further tightening, investors are weighing how to reposition their portfolios.

The Fed rate hike lifted the US dollar index by 0.67% to its highest recorded level since the end of July. As markets interpreted the decision as a sign that US interest rates will likely stay higher for longer, this boosted demand for the dollar against other major currencies. This is unwelcome news for Romania’s ongoing battle with inflation, as most commodities’ prices and imports from outside of the EU are quoted in dollars, including commodities like oil and LNG (Liquefied Natural Gas) but also consumer goods from Asia such as mobile phones, laptops and other electronics. According to the UN Comtrade database, in 2025 an estimated 19% of the imported goods in Romania were coming from Asia, 1.8% from the Americas and 1.5% from Africa.

Inflationary pressures in the US have remained strong. Global import tariffs, an energy shock triggered by the war with Iran, and heavy capital investment linked to the AI boom combined to push the Federal Reserve to raise its benchmark overnight interest rate by 0.25%, to a range of 3.75% to 4.00%. The decision was unanimous, meaning that it was also voted by the Trump-appointed Fed Chair, Kevin Warsh, too. As expected, the FOMC decision triggered a post by President Trump on his own Truth Social platform asking that interest rates be lowered to 1% or less, as the US is “the best credit in the world – by far” and the country’s economy is booming with new investments. In his post, Donald Trump stopped short of calling out Warsh, as he did with his predecessor Jerome Powell.

While the American president is looking at a rapid decrease in interest rates, updated quarterly economic projections showed that 16 of the Fed’s 18 policymakers expect at least one additional 0.25% rate increase by year-end, with only two members expecting rates to remain unchanged. All but one also flagged upside risks to inflation, moving away from the view that price pressures stemmed mainly from temporary supply shocks.

The Fed Chairman, who again did not submit interest-rate or other economic projections, said tighter monetary policy was warranted partly because the economy appears to be gaining momentum. Strong output and employment growth, he argued, are adding to inflationary pressure that now extends beyond oil prices and import tariffs. The long-term message is just as important. The Fed’s latest forecasts suggest that the federal funds rate could stabilize at around 3.2% in the long term, even after inflation returns to the 2% target. Strong consumer demand and the boom in investment in artificial intelligence could enable the economy to function under higher interest rates. In this context, cheap money is unlikely to return any time soon.

Investors are now contemplating how to adjust their portfolios for a persistently higher interest rate environment. According to etoro’s Q2 Retail Investor Beat survey, when asked, with interest rates elevated, where they expect to allocate more of their investments in the next 12 months, 22% of global investors mentioned stocks in growth sectors and an equal percentage to cash or short-term savings. One fifth intends to allocate more to commodities, while 19% are looking toward dividend-yielding stocks for a steady income, 18% are looking at crypto, and 17% at high-yield bonds or fixed income. Romanian retail investors are leaning more toward cash or crypto (23% each), followed by commodities like gold and oil (22%), 21% each are looking toward stocks in growth sectors and dividend-yielding stocks, 18% to high-yield bonds, 17% to alternative investments, and 16% to real estate. Only 14% at the global level and 6% of Romanian investors said that they do not plan additional investments.

Bogdan Maioreanu, etoro analyst and markets commentator, has over 20 years of experience in financial services and investments and a strong background in journalism. He held different Corporate Banking management positions in both Raiffeisen Bank and OTP Bank, before moving to business consultancy roles working for IBM Romania, among others. Bogdan is an Executive MBA from Asebuss and Washington University.

The diplomatic daily newspaper Nine O’Clock does not assume responsibility for the information received and published on the public website. The responsibility for the content lies solely with the issuer of the press release.

The diplomatic daily newspaper Nine O’Clock cannot be held accountable for false information transmitted by the recipients of the press releases/announcements.

The diplomatic daily newspaper Nine O’Clock reserves the right not to publish press releases that contain inappropriate expressions or accusations and violations of the rights of other individuals, guaranteed by the Constitution of Romania.

The content of the website is intended for public information. Copying, reproduction, recompilation, modification, as well as any form of content exploitation from this website are prohibited. The use of the Comments section signifies your agreement to abide by the terms and conditions regarding the publication of comments on