Federal Reserve signals higher interest rates ahead for economy

Federal Reserve Chair Kevin Warsh said on September 16 that the central bank will keep raising interest rates. He told reporters that inflation has stayed too high for too long, and that the Fed must bring prices under control.

When interest rates rise, borrowing becomes more expensive for businesses. Higher rates also make bonds more attractive, because bonds start to offer guaranteed returns that can compete with stocks.

However, history suggests stock markets do not always fall during rate increases. Data from Fidelity covering 1992 to 2026 shows that when the Fed raised rates after strong economic signals, the S&P 500 often went up over the next twelve months.