Biotech sector expected to weather Fed rate hike despite higher capital costs

The Federal Reserve raised the federal funds rate by a quarter of a percentage point, a move that traditionally weighs on capital‑intensive industries like biotech.

Analysts at BMO Capital Markets said the sector entered the hike on solid footing, suggesting the impact will be muted compared with earlier rate‑increase cycles.

They pointed to ongoing merger and acquisition activity as a key driver, with large pharmaceutical firms seeking new assets as existing patents expire. Higher borrowing costs may shift investors toward more selective stock picking rather than causing a broad downturn.

While the overall outlook for biotech remains resilient, the analysts warned that early‑stage companies could feel the squeeze as financing becomes more expensive.