The Fed Raised Interest Rates. So Why Did Stocks Go Up?

The Federal Reserve raised its main interest rate by 0.25 percentage points at its September 2026 meeting. The move was widely expected. For regular people, it can mean a little more interest on savings and a little more cost on new loans. Reuters

It is like a rain forecast everyone packed for. When the rain came, no one ran. Late on the Friday after the CPI report, which checks prices on everyday goods, market bets pointed to an over 80% chance of a hike from the 3.5%-3.75% range. Reuters

On Sept. 11, investors put about an 86% chance on a move the next week, with two hikes built into prices by year-end. Bloomberg

Stocks climbed higher on Sept. 17, one day after the hike. MarketWatch Trading was orderly. There was no messy selloff in assets that react fast to rates.

What stood out here is how calm stocks stayed. Normally higher rates can lower stock values, especially for fast-growing tech companies. MarketWatch Longer-term bonds sold off, but that did not push down stock values that day. Investors treated the hike as confirmation of a path already in prices, not as new news.

Chair Kevin Warsh says the Federal Reserve "will do whatever it takes to reduce U.S. inflation to its 2% target, but investors aren't buying it." MarketWatch That doubt was already clear in July trading around inflation.

The broader context here is expectations have flipped. In 2024, bond traders kept betting Chair Jerome Powell would deliver a jumbo, or extra-large, cut. MarketWatch As recently as October 2025, MarketWatch opinion made a strong case for an October cut while warning investors to brace for anything. Pricing two hikes by end of 2026 is the opposite setup.

In my view, the order matters more than the single 0.25-point step. An 86% chance turning into a done deal with stocks up shows investors care more about where rates will stop than about each meeting. Looking at what this means for markets, the tension is between market bets and trust in the Chair. If Warsh cannot close that gap, short-term rates will swing with each inflation report while stocks keep focusing on company profits. That split held on Sept. 17. It rarely lasts long when more hikes are still in prices.