Rate Hike

An increase in the federal funds rate by the Federal Reserve (or an equivalent benchmark rate by another central bank), typically aimed at cooling inflation or an overheating economy. Rate hikes raise borrowing costs across the economy, which tends to dampen consumer spending, slow corporate earnings growth, and put downward pressure on stock valuations. The Fed's aggressive hiking cycle in 2022-2023, the fastest in four decades, demonstrated how powerfully rate decisions can move equity, bond, and currency markets simultaneously.