Federal Reserve Rate Hike Looms: What It Means for Stocks

The US consumer inflation rate rose to 3.4% in August, according to the Bureau of Labor Statistics' latest numbers. This has led to a surge in interest rates, with the Federal Reserve now under pressure to raise the baseline interest rate.

Preliminary data from Fed Funds Rate futures indicates that there's a 90.3% chance of a quarter-point hike this Wednesday, with a new target range of 3.75% to 4% likely to be set.

Rising interest rates can impact the stock market in several ways. For one, it makes borrowing more expensive for companies and consumers alike, potentially slowing down economic growth. Additionally, with longer-dated bonds now offering higher yields than some dividend stocks, income investors may start swapping out their dividend payers for lower-risk fixed-income instruments.