The Fed could raise interest rates three times. Here’s where the market could face the stiffest test.

The suggestion that the Federal Reserve could raise interest rates three times speaks to a pattern economists often highlight: the central bank has historically been reluctant to adjust rates just once. Policy moves tend to come in sequences, as officials respond to evolving inflation and employment data rather than a single reading.

For markets, the significance lies less in any one hike than in the path they imply. Each increase raises borrowing costs across mortgages, business loans, and credit, which can weigh on valuations and shift the appeal of bonds relative to stocks. Sectors sensitive to financing costs, such as real estate and growth-oriented technology, often feel this most acutely.

What to watch is the guidance accompanying each decision, not just the decision itself. If policymakers signal a steady cadence, markets may price that in gradually. If the pace proves faster or slower than expected, volatility could follow. The stiffest test typically comes when expectations and reality diverge.