Fed Rate Hike Expectations Shake Up Stocks, Bonds, and Dollar

Fed Rate Hike Expectations Shake Up Stocks, Bonds, and Dollar
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NEW YORK—Interest rates could soon rise in the United States for the first time in almost a decade, and that’s shaking up financial markets.

Why all the anticipation? The Federal Reserve has held its benchmark rate close to zero since December 2008 to encourage borrowing and spending, and it’s been even longer since the Fed actually raised the cost of borrowing. The central bank last lifted rates in June 2006, the final hike in a two-year series of increases.

The Fed holds a policy meeting Tuesday. After a strong run of job growth in the United States, investors will be watching closely for any insight into whether the central bank is considering raising rates. That’s a move that some analysts said could happen as early as June.

Investors are already favoring stocks they think will do well under an improving economy.