The Federal Reserve raised its policy target range by 25 basis points to 3.75%-4%, in what Citi Research described as a hawkish turn that could push the U.S. housing market deeper into contraction. Chair Kevin Warsh said the move removed a "dose of accommodation," linked the decision to rising energy costs and indicated that further tightening remained possible. Citi’s baseline forecast sees cooler inflation keeping the Fed on hold in coming months, followed by rate cuts next year, although the likelihood of another increase as early as October has risen after Warsh’s post-meeting comments. Higher short-term rates and longer-term Treasury yields are tightening financial conditions for households and businesses. Citi said this is unlikely to materially slow AI (artificial intelligence)-related capital expenditure unless it triggers a stock-market correction or wider corporate credit spreads that restrict financing for technology hyperscalers. Housing, debt-dependent manufacturing and hiring are facing greater pressure, leaving economic growth increasingly reliant on a single AI-led engine and more exposed to unexpected macroeconomic shocks.