Here’s what investors need to watch for on Wednesday — in addition to a Fed rate hike

Investors are anticipating the Federal Reserve to raise its benchmark interest rate on Wednesday. According to the CME FedWatch Tool, there is around an 87-94% chance of a 25 basis-point hike, lifting the Fed Funds Rate to 3.75%-4.00%. This move is largely expected and has already been priced into the market.

The rate hike is not the only thing investors are watching, as the real drama unfolds after the Fed's decision. Analysts are closely watching four key areas, and the VIX has risen 22.6% over the past month, indicating pre-Fed jitters. The 10Y Treasury yield has also crossed above 5% for the first time since October 2023, tightening financial conditions before the Fed acts.

A rate hike could have various effects on the economy and consumers. Borrowing is likely to become more expensive, and interest rates on savings accounts and deposits may increase, although the increase is likely to be small. According to CBS News, some forecasters predict one or two additional rate hikes over the next several months, as inflation remains above the central bank's 2% annual target, with the Consumer Price Index rising at an annual pace of 3.4% in August.

Brief written by urgent.news from MarketWatch, Investing.com, Hindustan Times - World News, CBS News — 4 reports on this story. Machine-written — may contain errors; check the original before relying on it.