The Federal Funds rate is the overnight bank rate at which banks loan money to each other. It is the most important benchmark from which other short term rates are set. The Fed controls this rate and uses it as a lever to control the economy.
The Fed has been raising rates over the past two years. This serves to slow the economy down, and avoid overheating. This helps to keep a lid on inflation, which the Fed views as anathema to long term economic growth.
These gradual quarter point increases have taken short term rates from essentially zero to now 2.25%. The changes have been made at such a gradual pace that it hasn’t yet upset the economic apple cart. There is worry, however, that the cumulative effect could start to build up. Fed increases tend to have a very long lag from when the Fed increases rates to when it slows the economy.
Utilities are off
Export Sensitive Industries
This could not happen at a worse time. Take a firm like Caterpillar. Not only are they struggling with the raging tariff wars, they now have increasing prices overseas to compensate for the rising dollar. This double whammy will definitely impact foreign sales. The same could be true for Archer Daniels and other Ag firms.