As Fed Meets, Investor Angst Over Rate Hikes Spooks Markets

With high inflation squeezing consumers and businesses, the Fed is expected to signal that it will raise its benchmark short-term interest rate.

Wild volatility in the stock market this week has put heightened scrutiny on the Federal Reserve's meeting Wednesday and whether the Fed will clarify just how fast it plans to tighten credit and potentially slow the economy.

With high inflation squeezing consumers and businesses, the Fed is expected to signal that it will raise its benchmark short-term interest rate in March in a dramatic reversal from the ultra-low-rate policies it imposed during the pandemic recession. To further tighten credit, the Fed also plans to end its monthly bond purchases in March. And later this year, it may start reducing its huge stockpile of Treasury and mortgage bonds.

Investors fear there may be still more to come. Some on Wall Street worry that on Wednesday, the Fed may signal a forthcoming half-point increase in its key rate. There is also concern that at a news conference, Fed Chair Jerome Powell could suggest that the central bank will raise rates more times this year than the four hikes most economists expect.