Federal Reserve rate hikes can affect the economy in several ways:

1. Interest rates: The most direct impact of a Fed rate hike is on interest rates. When the Fed raises interest rates, banks and other lenders typically follow suit, raising their own interest rates on loans and other forms of credit. Higher interest rates can make it more expensive for consumers and businesses to borrow money, which can lead to a decrease in spending and investment.

2. Inflation: One of the main reasons the Fed raises interest rates is to combat inflation. Higher interest rates can make borrowing more expensive, which can reduce spending and slow down economic growth. However, higher interest rates can also increase the value of the dollar, which can make imports cheaper and put downward pressure on inflation.

3. Stock market: The stock market can also be affected by Fed rate hikes. Higher interest rates can make bonds and other fixed-income investments more attractive, which can lead to a decrease in demand for stocks. However, higher interest rates can also signal that the economy is doing well, which can boost investor confidence and lead to higher stock prices.

4. Exchange rates: Fed rate hikes can also affect exchange rates. When the Fed raises interest rates, it can make the dollar more attractive to foreign investors, which can lead to an increase in the value of the dollar relative to other currencies. This can make exports more expensive and imports cheaper, which can have an impact on international trade.

5. Consumer spending: Higher interest rates can make borrowing more expensive, which can lead to a decrease in consumer spending. This can be particularly true for large purchases like homes and cars, where higher interest rates can increase the cost of borrowing and make these purchases less affordable. However, higher interest rates can also boost savings rates, as consumers may be more likely to save money if they are earning higher interest on their savings.

6. Business investment: Higher interest rates can also make it more expensive for businesses to borrow money to invest in new projects or expand their operations. This can lead to a decrease in business investment, which can slow down economic growth. However, higher interest rates can also indicate that the economy is doing well, which can boost business confidence and lead to increased investment.

7. Housing market: The housing market can be particularly sensitive to changes in interest rates. When interest rates rise, it can make mortgages more expensive, which can lead to a decrease in demand for homes. This can result in a slowdown in the housing market and a decrease in home prices. However, higher interest rates can also help to cool down an overheated housing market and prevent a housing bubble from forming.

8. International effects: The impact of Fed rate hikes can also be felt beyond the United States. Higher interest rates can lead to an increase in the value of the dollar relative to other currencies, which can make U.S. exports more expensive and imports cheaper. This can have an impact on international trade and can also affect the earnings of U.S. companies that do business overseas.

Overall, the impact of Fed rate hikes on the economy can be complex and depend on a variety of factors. Higher interest rates can lead to slower economic growth in the short term, but they can also help to combat inflation and promote long-term economic stability. The Fed typically carefully considers the potential impacts of rate hikes before making a decision, taking into account a range of economic indicators and factors.