The Federal Reserve hiked its benchmark interest rate by 0.25% on Wednesday (February 1), bringing it to a range of 4.5% to 4.75%. That is the highest the rate has been since October 2007.

It is the eighth consecutive time that the Federal Reserve has increased the interest rate since March 2022, as the agency tries to clamp down on inflation.

In a statement, the Federal Reserve's Open Market Committee noted that inflation "has eased somewhat but remains elevated" and anticipates the need for "ongoing increases in the target range."

Stocks initially reacted negatively to the news, hitting session lows before rebounding. The Dow Jones Industrial Average clawed its way back after being down over 300 points and was down just 84 points while Federal Reserve Chairman Jerome Powell addressed the media. Meanwhile, the S&P 500 and Nasdaq surged into the black. The Nasdaq was ahead by 150 points, and the S&P 500 was trading more than 30 points higher.

Powell said that while inflation appears to be slowing, the Federal Reserve needs to see more evidence it "is on a sustained downward path."

"The inflation data received over the past three months show a welcome reduction in the monthly pace of increases," Powell said. "While recent developments are encouraging, we will need substantially more evidence to be confident that inflation is on a sustained downward path."

"I think it would be very premature to declare victory or think we really got this," Powell added. "The job is not fully done."

As Powell took questions from the media, stocks continued to surge, with the Dow Jones moving into positive territory as the other two indexes continued to rise.

All three indexes finished the day in the black, with the Dow closing up 8.30 points, the S&P 500 up by nearly 43 points, and the Nasdaq up 231 points.