--- title: Stock Surged After Fed Says Interest Rate Hikes Could Slow — but Investors Shouldn’t Celebrate Too Early description: The Federal Reserve's Jerome Powell sent stocks soaring when he said smaller interest rates could come as soon as December. 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: Brad Tuttle role: Senior Editor url: https://money.com/author/brad-tuttle/ bio: Brad Tuttle is a former senior editor at Money with over 10 years’ experience covering a vast number of personal finance topics, including careers, cars, travel, budgeting, investing, insurance, credit cards, consumer psychology, real estate, banking, and shopping and deals. education: Columbia University School of Journalism, MS at_money_since: 2014 articles: 366 covers: - Economy and Politics - Banking - Business - Career Advice - Credit - Credit Cards - Education - Health and Wellness - Housing - Identity Theft - Insurance - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Pets - Professional Services - Retirement - Shopping - Taxes - Technology social: - https://twitter.com/bradrtuttle - https://linkedin.com/in/brad-tuttle-834b225 former_staff: true published: '2022-12-01T16:47:54.000Z' modified: '2024-01-10T17:45:28.000Z' section: Economy and Politics tags: - News - stocks word_count: 698 canonical: https://money.com/stocks-rise-fed-interest-rate-comments/ 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/). ![Chair of the U.S. Federal Reserve Jerome Powell speaks at the Brookings Institution, November 30, 2022](https://img.money.com/2022/12/News-Powell-Interest-Rate-Hikes.jpg?crop=0px%2C115px%2C2175px%2C1223px&quality=85) *Chair of the U.S. Federal Reserve Jerome Powell* Jerome Powell gave investors some much-needed holiday cheer on Wednesday. At a speech at the Brookings Institution, the chair of the Federal Reserve signaled that smaller interest rate hikes could come as soon as this month. The central bank has spent the year in a battle with decades-high [inflation](https://money.com/inflation-report-stocks-soaring/). In order to bring down spiraling consumer prices, it's been raising interest rates at an aggressive pace. Most recently, the Fed [hiked its benchmark interest rate](https://money.com/fed-interest-rate-hike-november-2022/) by 0.75% in November, bringing the Fed’s benchmark federal funds rate to a target range of between 3.75% and 4%. It was the sixth hike in the span of a year and the fourth consecutive hike that large. But now, it looks like those big hikes may be behind us. "Monetary policy affects the economy and inflation with uncertain lags, and the full effects of our rapid tightening so far are yet to be felt," Powell said. "Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down." He added that moderating the pace of rate increases could come as soon as the next Federal Open Market Committee (FOMC) meeting, which is scheduled for Dec. 13-14. Stocks surged after Powell's comments on Wednesday, with the [S&P 500](https://money.com/how-to-invest-in-sp500/) ending the day up 3.1% and the [Nasdaq](https://public.com/stocks/ndaq) Composite up 4.4%. Interest rate hikes are a tool the Fed uses to bring down inflation, but those increases can also [weigh on the prices of financial assets](https://money.com/inflation-affecting-stock-market-2022/), like [stocks](https://money.com/how-to-buy-stocks/). That's because higher rates make it more expensive for financial institutions to borrow money, and a ripple effect ends up increasing the borrowing costs for companies and consumers. Businesses face higher costs and consumers have less money to spend. This hurts how much companies earn and how those companies are expected to perform moving forward. And *that* can cause their stock prices to fall. Stocks, along with other assets like [bonds](https://money.com/buying-bonds-great-investing-move/) and [crypto](https://money.com/what-is-cryptocurrency/), have certainly struggled this year. The [S&P 500](https://public.com/stocks/spy) is down around 15% for the year. So the notion that interest rate hikes could soon be smaller was welcome news for investors. ## Why investors shouldn't get too excited To be clear, this doesn't mean interest rate hikes are going away. In fact, Powell explicitly said they're not: "We anticipate that ongoing increases will be appropriate," he said. Powell pointed out that while bottlenecks in goods production and the price of goods appear to be easing, the labor market "shows only tentative signs of rebalancing" and wage growth is still "well above levels that would be consistent with 2% inflation over time." (The FOMC targets a 2% inflation rate.) "Despite some promising developments, we have a long way to go in restoring price stability," he added. Doing so may mean holding policy "at a restrictive level for some time." As in, while interest rate hikes may get smaller, investors probably shouldn't expect a complete turnaround anytime soon. "Before you get too excited, remember that this is a shift, not a pivot," Callie Cox, an analyst at the investment firm eToro, said in a note shared with Money. "Powell has been clear that rates could stay high for some time." She added that "a high-rate environment isn’t the easiest to invest in, and we could be in for a tougher slog to the highs until inflation comes down significantly." Strategists at JPMorgan Chase & Co. [said](https://www.bloomberg.com/news/articles/2022-12-01/jpmorgan-strategists-see-us-stocks-slumping-in-first-half-of-2023) in a note Thursday that U.S. stocks could decline sharply in the first half of 2023 before rebounding. Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a research note that, "Despite the recent rebound in equities, we do not think the macroeconomic conditions for a sustained market rally are yet in place." So for now, investors shouldn't get too ahead of themselves. "History cautions strongly against prematurely loosening policy," Powell concluded. "We will stay the course until the job is done." [Stocks Often Rally in December — Here’s What Investors Can Expect Now](https://money.com/will-stocks-rally-december-2022/) [What Investors Should Do as Protests in China Rattle Global Markets](https://money.com/what-china-protests-mean-for-stocks/) [7 Best Online Stock Trading Platforms of 2022](https://money.com/best-online-stock-trading/) ```json { "@context": "https://schema.org", "@graph": [ { "@type": "BreadcrumbList", "@id": "https://money.com/stocks-rise-fed-interest-rate-comments/#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": "Stock Market", "item": "https://money.com/stock-market/" }, { "@type": "ListItem", "position": 4, "name": "Stock Surged After Fed Says Interest Rate Hikes Could Slow — but Investors Shouldn’t Celebrate Too Early" } ] }, { "@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/stocks-rise-fed-interest-rate-comments/#webpage", "url": "https://money.com/stocks-rise-fed-interest-rate-comments/", "name": "Stock Surged After Fed Says Interest Rate Hikes Could Slow — but Investors Shouldn’t Celebrate Too Early", "isPartOf": { "@id": "https://money.com/#website" }, "datePublished": "2022-12-01T16:47:54.000Z", "mainEntity": { "@id": "https://money.com/stocks-rise-fed-interest-rate-comments/" }, "inLanguage": "en-US", "breadcrumb": { "@id": "https://money.com/stocks-rise-fed-interest-rate-comments/#breadcrumb" }, "dateModified": "2024-01-10T17:45:28.000Z" }, { "@type": "NewsArticle", "headline": "Stock Surged After Fed Says Interest Rate Hikes Could Slow — but Investors Shouldn’t Celebrate Too Early", "articleSection": "Economy and Politics", "image": [ { "@type": "ImageObject", "url": "https://img.money.com/2022/12/News-Powell-Interest-Rate-Hikes.jpg?crop=0px%2C115px%2C2175px%2C1223px&quality=85", "width": 1012, "height": 569, "caption": "News-Powell-Interest-Rate-Hikes" } ], "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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