What's going on?

The Federal Reserve (Fed) delivered its expected 0.75 percentage point hike and warned there�d be more big increases to come.

What does this mean?

After August�s dismal inflation report, there was never any doubt that the Fed would jack up rates ��but the announcement itself was just a warm-up for the main event: the Fed�s long-term rate projections. A lot has changed since the last update in June, and the Fed�s �dot plot� (forecast of future rates) now points to peak rates of 4.6% in 2023 and no falls till 2024 � sparking an initial selloff by investors who hoped for a lower peak and earlier cuts.

Why should I care?

For markets: Read my lips.
�Fed Watchers� try to predict future rate decisions by picking apart Federal Reserve statements. It�s a tricky business � and there are more reliable ways of guessing at the Fed�s next play. �Credit spreads� are one: they�re a measure of how expensive it is for companies to borrow � and the fact they�ve jumped 70% over the last year for firms with strong credit ratings suggests that companies are feeling the interest-rate pinch. The Fed will be watching signs like this for indications of debt-related stress: if corporate borrowing costs spiral, they just might ease up on hikes a little.

The bigger picture: The Fed�s tightrope walk.
As the Fed�s been raising rates, the US yield curve�s drooped like a sunflower in late fall: in other words, it�s inverted, a pretty reliable sign that a recession�s looming. How painful that recession is depends on two key things: how long inflation sticks around and how high rates have to go to conquer it. See, if the Fed raises too slowly, inflation will continue, creating bigger problems down the line. But go too fast, and it risks triggering a drawn-out recession. No wonder the world�s watching the Fed so closely.