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Published: Dec 14, 2022 5 min read

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Photo illustration featuring Jerome Powell and a stock graph
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The Federal Reserve has taken a step back from its rapid pace of interest rate increases — but investors aren't rejoicing yet.

The U.S. central banking system raised interest rates by a half percentage point on Wednesday. While that would historically be called a significant hike, nowadays it's considered looser monetary policy, as the last four rate hikes were three-quarters of a percentage point. The latest move brings the federal funds rate, which the Fed has been repeatedly increasing to fight persistent inflation, to a target range of between 4.25% and 4.5%.

Stocks immediately fell after the announcement.

You may think a lower rate hike than investors have become accustomed to would have them celebrating because interest rate increases weigh on the price of financial assets, but Fed Chair Jerome Powell's post-announcement remarks indicated investors shouldn't get ahead of themselves.