Key Points

• The Federal Open Market Committee has already said that it expects to hike rates once more before the end of this year.

• Futures traders and bond investors also see higher rates coming.

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Nearly everyone expected the Federal Reserve, led by new Fed Chair Kevin Warsh, to hike its benchmark interest rate this week, and sure enough, it delivered, with a quarter-point increase in the federal funds rate.

The question on many people's minds now is, was that a one-and-done hike, or will the Fed continue to hike rates in the coming months?

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We have several ways to peer into the future and attempt to answer that question, though, of course, none are definitive, as changing conditions in the U.S. economy can always lead the Fed to alter its course.

The first data point one can look at, of course, is what Warsh and his colleagues on the Federal Open Market Committee (FOMC) said. Warsh came across as hawkish in his post-statement press conference, saying that this week's rate hike "starts to show we're serious" about delivering price stability by bringing inflation down. He also said that the Fed's other responsibility, the labor market, "is in good shape." So, it's pretty clear that the Fed is now focused on fighting inflation, which requires higher interest rates, rather than on maximizing employment, which often calls for lower interest rates.

In addition, FOMC members submitted their projections of where they expect the fed funds rate to be by the end of this year, and the median projection rose from 3.8% to 4.1%, suggesting that the group anticipates one more hike this year. The current fed funds rate is a range of 3.75% to 4%.

Futures traders and bond investors expect more rate hikes

The second way to gauge expectations about where benchmark interest rates are headed is through the futures market, which prices in various levels for the fed funds rate going forward. That market now puts the chances of an additional rate hike this year at about 87%, taking the rate to a range of 4% to 4.25% by year's end. And futures traders expect more rate hikes in 2027, with the Fed's benchmark rate likely to rise above 4.25% by December 2027.

Finally, we need to look at the yield on the 2-year U.S. Treasury note, which most closely tracks where the bond market expects the fed funds rate to go. That yield has climbed in recent months and now stands at 4.7%, suggesting that bond traders collectively expect about three additional quarter-point hikes in the coming months.

So, right now, just about everyone watching the Fed thinks the recent rate hike was not a "one and done" but the beginning of a rate-hiking cycle.

Usually, the stock market underperforms during such rate-hiking cycles, as higher interest rates make borrowing more expensive for both companies and consumers. Yet this latest rate hike was met with some joy in the market. On Thursday -- the day after the Fed acted -- the S&P 500 index rose 1.1%.

Investors had become increasingly concerned that the Fed wasn't doing enough to address elevated inflation, which can hurt the market and the broader economy in many ways. So, there was a dose of relief after Warsh and his colleagues hiked -- unanimously -- because it suggests that the Fed is on the case.

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