The United States Federal Reserve is almost sure to implement a new interest rate hike later today. Many market analysts are warning investors that the rate change could lead to a new period of high market volatility.

Data from Bespoke Investment Group released on Tuesday of this week has indicated that stocks have dropped by as much as 0.13% on days when the fed has held key meetings. Although this type of movement won’t be enough to completely unsettle the markets, short term gains from the last quarter could end up being eroded.

The S&P 500 index has shown poor performance when the Fed has held meetings this year. This index tracks the largest market capitalization stocks on the U.S. exchanges.

Fed Likely to Increase Rate by 25 Basis Points

The interest rate target range is expected to move from 2 percent to 2.25 percent this week. An announcement is likely to be made before the end of Wednesday. The Fed is aiming to keep inflation in check during a period of unprecedented economic growth.

While the conservative estimate of .25 is likely to be the outcome later today, there is a fringe group of investors and analysts who believe that the Fed could push rates up by half a point, making the interest rate target 2.5 percent. This hasn’t happened in almost 20 years, and, although it is unlikely to happen today, it does show that some pessimistic investors are preparing for the worst.

Even the more realistic .25 percent increase is likely to rattle the markets this week, and stability may not return until the first week of October.

Should Investors Worry About the Fed’s Hawkish Attitude?

Interest rate hikes are often presented as bad news for investors. The Fed is approaching the situation carefully to avoid interrupting economic growth while keeping inflation at reasonable levels. Short traders and risk-happy investors who trade daily are right to be worried. Long term growth stock investors have less to worry about, as the impact of rate changes should be short term.

This latest news should inform investment decisions this week, but for the majority of Americans with long term portfolios the impact will be minimal, and continued rate increases this year are actually signs of a strong economy that still has room to move upwards.