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The Federal Reserve just hiked interest rates — here's the next shoe to drop

The Federal Reserve entering an interest-rate hiking cycle will have ramifications for the U.S. economy over time, stresses former Fed economist Vincent Reinhart.

"Mortgages will be a little more expensive. You may see some increases in loan rates. It will be harder to buy a car on credit. That is the slowing," Reinhart, who is now chief economist at Dreyfus and Mellon, said on Yahoo Finance Live.

One could officially start the clock on these things happening.

The Fed widely delivered its first interest rate increase since 2018 on Wednesday, lifting the Fed funds rate by 25 basis points.

Projections released by the policy-setting Federal Open Market Committee signal the likelihood of the Fed raising rates up to six more times this year. If undertaken, rates would be 1.75% higher by year-end, compared to the end of 2021, notes Yahoo Finance's Brian Cheung.

While the markets rallied on Wednesday after the Fed decision as Chairman Jerome Powell didn't sound too hawkish, clearly investors remain on edge on the impact of rate increase.

U.S. Federal Reserve Chairman Jerome Powell speaks to reporters after the Federal Reserve cut interest rates in an emergency move designed to shield the world's largest economy from the impact of the coronavirus, during a news conference in Washington, U.S., March 3, 2020. REUTERS/Kevin Lamarque
U.S. Federal Reserve Chairman Jerome Powell speaks to reporters after the Federal Reserve cut interest rates in an emergency move designed to shield the world's largest economy from the impact of the coronavirus, during a news conference in Washington, U.S., March 3, 2020. REUTERS/Kevin Lamarque

The S&P 500 entered Thursday's session down 10.6% for the year. That is the sixth worst start to a year for the S&P 500 ever, says strategists at LPL Financial.

Ahead of those higher interest rates, consumer confidence has taken a hit amid soaring food and gas price inflation. Retail sales for February also came in worse than expected as shoppers pushed back on higher prices or cut back altogether on spending.

Top economists fear U.S. GDP growth could go slightly negative for the first quarter as the economy battles through the various headwinds.

"We all acknowledge there's a great deal of uncertainty in the world we live in today, from rising interest rates to global conflicts," Williams Sonoma CEO Laura Alber told analysts on an earnings call Wednesday evening.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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