--- title: How the Fed's Smaller Rate Hike Could Affect Investors description: The Federal Reserve raised interest rates by 0.25% in an acknowledgement that "inflation has eased somewhat." But it's not done yet. authors: - name: Mallika Mitra role: Contributing Editor url: https://money.com/author/mallika-mitra/ bio: Mallika Mitra is a contributing editor for Money, based in Chicago. She has covered investing and retirement for seven years and her work has appeared in CNBC, Bloomberg, Kiplinger, AARP, Barron’s, Bankrate, The Daily Upside, ETF.com, The Bond Buyer, PLANADVISER, PLANSPONSOR and Investopedia. education: Craig Newmark Graduate School of Journalism at CUNY Kalamazoo College at_money_since: 2020 articles: 395 covers: - Economy and Politics - Banking - Business - Career Advice - Credit - Credit Cards - Debt - Education - Health and Wellness - Housing - Identity Theft - Insurance - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Pets - Professional Services - Retirement - Shopping - Taxes - Technology also_seen_in: - CNBC - Bloomberg - Kiplinger - Barron's - Bankrate - WGN-TV - CBS News Radio - This Morning With Gordon Deal - Everyone's Talkin' Money social: - https://twitter.com/mitra_mallika - https://www.linkedin.com/in/mallika-mitra-4577a386/ editors: - name: Julia Glum role: Managing Editor url: https://money.com/author/julia-glum/ bio: Julia Glum joined Money in 2018 and specializes in covering financial trends that affect everyday Americans' wallets. She also writes Dollar Scholar, a weekly newsletter that teaches young adults how to navigate the messy world of money. education: University of Florida at_money_since: 2018 articles: 453 covers: - Economy and Politics - Banking - Business - Career Advice - Credit - Credit Cards - Debt - Education - Health and Wellness - Housing - Identity Theft - Insurance - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Professional Services - Retirement - Shopping - Taxes - Technology also_seen_in: - Newsweek - International Business Times - CBS News - Good Morning America - WUSA9 - Pix 11 - The New York Times - Mashable - The Washington Post - CNBC - Politico social: - https://x.com/superjulia - https://www.linkedin.com/in/julia-glum published: '2023-02-01T21:12:58.000Z' modified: '2023-02-01T21:12:58.000Z' section: Economy and Politics tags: - News - stocks word_count: 589 canonical: https://money.com/fed-interest-rate-hike-february-2023/ type: NewsArticle source: structured-blocks --- > **Disclosure:** We research all brands listed and may earn a fee from our partners. Research and financial considerations may influence how brands are displayed. Not all brands are included. [Learn more](https://money.com/page/disclaimer/). ![Federal Reserve Board Chairman Jerome Powell speaks during a news conference](https://img.money.com/2023/01/Investing-Latest-2023-Fed-Rate.jpg) The Federal Reserve's battle with inflation continued Wednesday with an interest rate hike of 25 basis points (or 0.25%) and an indication that more increases are likely on the horizon. The announcement was expected and smaller than the hikes investors have gotten used to recently. In December, the U.S. [central bank raised rates](https://money.com/fed-interest-rate-hike-december-2022/) by a half percentage point; the four hikes before that were by 75 basis points (0.75%). The latest increase brings the federal funds rate, the rate at which banks borrow money from each other overnight, to a target range of between 4.5% and 4.75%. Here's what investors need to know. ## The Fed just announced another rate hike ### Work with a licensed Rocket Mortgage (NMLS #3030) representative in your state today. [View Rates](https://money.com/pr/s1cf72e3973e?ap_referrer=%2Ffed-interest-rate-hike-february-2023%2F) ## What's happening now The central bank has been hiking interest rates since early last year to fight record-high inflation. High interest rates make it more expensive for financial institutions to borrow money, and a ripple effect makes borrowing money expensive for businesses and consumers as well. That can impact companies' earnings and outlooks, which can in turn weigh on their stock prices. Prices of financial assets — like [stocks](https://money.com/how-to-buy-stocks/), [bonds](https://money.com/buying-bonds-great-investing-move/) and [crypto](https://money.com/bitcoin-price-predictions-2023/) — have been hurting amid the interest rate hikes. Stocks immediately fell Wednesday afternoon following the Fed's announcement before quickly rebounding. "No big surprise in today's announcement, either in the level of rate increase or in the accompanying language," Melissa Brown, global head of applied research at financial analytics and index provider Qontigo, said in an emailed statement. "If traders were hoping for indication of a rate cut, they were disappointed." Others are optimistic and say the Fed is nearing the end of the tightening cycle. "They are getting ready to sit tight while the economic data catches up to the policy," Charlie Ripley, senior investment strategist for Allianz Investment Management, said via email. "Slowing the pace of rate hikes is a clear sign that the Fed is getting comfortable with the idea that the prescribed policy for the economy is finally starting to work." ## What's next Jerome Powell, the chair of the Fed, signaled that the central bank is maintaining its aggressive stance against spiraling consumer prices. While the Fed said in its [press statement](https://www.federalreserve.gov/newsevents/pressreleases/monetary20230201a.htm) that "inflation has eased somewhat," it also said that inflation remains elevated. Inflation fell to 6.5% on an annual basis in December, still much higher than the Fed's target range of 2% in the long run. As such, the Fed anticipates "ongoing increases in the target range will be appropriate," according to the statement. "The inflation data received over the past three months show a welcome reduction in the monthly pace of increases," Powell said during a 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." ## Mortgage Rates are about to go up, according to The Fed ### Work with a licensed Rocket Mortgage (NMLS #3030) representative today. [View Rates](https://money.com/pr/i6699800ff95?ap_referrer=%2Ffed-interest-rate-hike-february-2023%2F) ## What this means for you Financial markets have been volatile of late, with the [S&P 500](https://money.com/how-to-invest-in-sp500/) [ending 2022 down nearly 20%](https://money.com/investor-tips-after-stocks-worst-year/). The index was up around 8% for the year as of Wednesday afternoon, but [experts predict](https://money.com/when-will-the-stock-market-recover-heres-what-experts-predict/) risks remain for the stock market, and that investors should likely brace for more ups and downs. [Financial advisors](https://money.com/how-to-choose-a-financial-advisor/) tend to recommend sticking to an investment plan that takes into account your risk tolerance, goals and time horizon. That's because timing the market is extremely challenging — and near impossible to do perfectly — for both everyday investors and professionals, especially when markets are facing so much uncertainty. ## Worried about protecting your hard-earned financial assets? ### Gold IRAs help you protect your investments by providing the asset diversification and stability you need. Click below to start investing today! [Invest in Gold](https://money.com/pr/r8b58421c811?ap_referrer=%2Ffed-interest-rate-hike-february-2023%2F) ```json { "@context": "https://schema.org", "@graph": [ { "@type": "BreadcrumbList", "@id": "https://money.com/fed-interest-rate-hike-february-2023/#breadcrumb", "itemListElement": [ { "@type": "ListItem", "position": 1, "name": "Home", "item": "https://money.com" }, { "@type": "ListItem", "position": 2, "name": "Economy and Politics", "item": "https://money.com/economy-and-politics/" }, { "@type": "ListItem", "position": 3, "name": "Federal Reserve", "item": "https://money.com/federal-reserve/" }, { "@type": "ListItem", "position": 4, "name": "How the Fed's Smaller Rate Hike Could Affect Investors" } ] }, { "@type": "WebSite", "@id": "https://money.com/#website", "url": "https://money.com", "name": "Money", "publisher": { "@id": "https://money.com/#organization" } }, { "@type": "WebPage", "@id": "https://money.com/fed-interest-rate-hike-february-2023/#webpage", "url": "https://money.com/fed-interest-rate-hike-february-2023/", "name": "How the Fed's Smaller Rate Hike Could Affect Investors", "isPartOf": { "@id": "https://money.com/#website" }, "datePublished": "2023-02-01T21:12:58.000Z", "mainEntity": { "@id": "https://money.com/fed-interest-rate-hike-february-2023/" }, "inLanguage": "en-US", "breadcrumb": { "@id": "https://money.com/fed-interest-rate-hike-february-2023/#breadcrumb" }, "dateModified": "2023-02-01T21:12:58.000Z" }, { "@type": "NewsArticle", "headline": "How the Fed's Smaller Rate Hike Could Affect Investors", "articleSection": "Economy and Politics", "image": [ { "@type": "ImageObject", "url": "https://img.money.com/2023/01/Investing-Latest-2023-Fed-Rate.jpg", "width": 5262, "height": 3508, "caption": "Investing-Latest-2023-Fed-Rate" } ], "author": [ { "@type": "Person", "name": "Mallika Mitra", "url": "https://money.com/author/mallika-mitra/", "@id": "https://money.com/author/mallika-mitra/#author", "description": "Mallika Mitra is a contributing editor for Money, based in Chicago. 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