Rate-hike fears could continue to cloud the markets

LAST week, stocks dropped on bets that the US Federal Reserve is finally running out of patience and the declines could continue this week as investors adjust to a new central banking world order.

Traders fear a rate hike will drive up mortgage costs, make it more expensive for corporations to service bonds and make deals and continue the US dollar's resurrection. "The big question is will higher rates put an end to the bull market in equities?" said one money manager.

Since Janet Yellen first took over as the Fed chair from Ben Bernanke in early 2014, she has hinted that the central bank is preparing to shift to a rate-hiking stance from the five-year series of rate cuts and quantitative easing that her predecessor presided over. Wednesday's Fed policy decision could be the boldest statement of Ms Yellen's intent to date. Since the Fed stopped buying Treasuries, the rate-setting committee has prevented financial panic by inserting a promise to be "patient" with its future course of action. Most analysts and traders interpreted that as a pledge from the central bank to not raise rates for at least two subsequent meetings.