The FED monitors inflation indicators to manage inflation. When indicators rise more than 3% a year the Fed raises the Federal Funds Rate to keep rising prices under control.
A higher interest rate means higher borrowing costs so consumers and businesses borrow less and spend less. Demand for goods & services drops and inflation falls.
On the other hand, falling interest rates results when the Fed lowers the federal funds rates. Borrowing becomes cheaper and people spend more, this can end the recession.
Interest rates affect consumer and business spending. When rates rise people spend less causing the companies' earnings to fall and stock prices to drop. The opposite is equally true.
Bond prices and interest rates have an inverse relationship. As one increases the other decreases. Govt raised money by selling bonds but it's expensive when interest rates move up.
Fed rate hikes will impact all markets. If the rate raises, money circulation decreases, and demand follow that. If we have less money to spend, they save first rather than invest.
When Fed decides to hike interest rates it also affects the mortgage loan cost. Rising rates make homes more expensive for buyers, thereby reducing the demand for home purchases.
If the Interest rates rise too quickly, reducing the demand for goods and services. This causes less revenue for businesses so they lay off workers which increases unemployment.
Banks, brokerages, mortgage companies, and insurance companies' earnings often increase - as interest rates move higher - because they can charge more.