Stocks climbed across the board on Wednesday afternoon following the eighth interest rate hike from the Federal Reserve.
The Fed’s rate-setting Federal Open Market Committee boosted the federal funds rate by 0.25 percentage point on Wednesday, aligning with market expectations. This moves takes interest rates to a target range of 4.5%-4.75%, the highest since October 2007.
The Fed’s latest hike represented a slowing from its half-point increase in December and the four consecutive 0.75 percentage point moves earlier in 2022, giving a nod to investors hoping the central bank would ease off its aggressive tightening campaign.
This less aggressive rate hike spelled relief on Wall Street – leading the Dow Jones to end the day up nearly 7 points, or 0.02%, while the S&P 500 gained 1.05% and the Nasdaq Composite added 2%.
Footwear stocks were also up on Wednesday. Foot Locker was up nearly 4% at the closing bell on Wednesday, while Nike rose 1.7%, Adidas added 2.17% and DSW parent company Designer Brands gained 1.07%.
Although this is good news for investors, the central bank was clear on Wednesday that more rate hikes will be necessary in the coming months in order to bring inflation down to the 2% standard.
“Inflation data received over the past three months show a welcome reduction in the monthly pace of increases,” Fed chairman Jerome Powell said in his post-meeting news conference. “And while recent developments are encouraging, we will need substantially more evidence to be confident that inflation is on a sustained downward path.”
And while inflation has begun to show signs of cooling, consumer prices rose by 6.5% in December compared to the prior year, marking the smallest 12-month increase since the period ending in October 2021 and a slowdown from November’s 7.1% and October’s 7.7% year over year growth.
Meanwhile, the labor market has remained robust. The U.S. economy added 223,000 jobs in December, beating estimates of 200,000 jobs. This number represented a dip from November, which saw an increase of 256,000 jobs and from October, which saw an increase of 263,000 jobs.