The Federal Reserve raised short-term interest rates Wednesday by a quarter percentage point, bringing its benchmark rate to a new range of 4.50% and 4.75%, the highest level since October 2007.

In its statement on Wednesday, the central bank acknowledged the slowdown in inflation as the Fed continues to assess the impact its interest rate hikes have had on consumer prices over the last year.

The 25 basis point rate hike marks a further slowdown in the Fed's pace of rate increases after the Fed raised rates by 50 basis points in December and 75 basis points at each of its four meetings from June through November — the fastest clip since the 1980s.

Fed officials acknowledged in Wednesday's statement "inflation has eased somewhat but remains elevated." The Fed no longer noted Russia's war in Ukraine as contributing upward pressure on inflation, but said this conflict is contributing to elevated global uncertainty.

Speaking in a press conference on Wednesday, Fed Chair Jerome Powell was somewhat more optimistic on the outlook for inflation, saying: "We can now say for the first time that the disinflationary process has started."

These comments sent stocks higher on Wednesday.

In its policy statement, the Fed said "ongoing increases" in interest rates will likely be appropriate to obtain a monetary policy stance that is "sufficiently restrictive" — in effect countering the recent easing in financial conditions that has resulted from higher stock prices and a moderation in rates for Treasuries and other bonds.

The Fed noted that in determining the "extent" of future rate hikes, instead of the pace, the central bank will take into account lags in monetary policy and the impact on inflation, the economy, and financial markets.

Wednesday's decision was unanimous, with all 12 members of the Federal Open Market Committee voting in favor of the rate increase.

After hitting a 40-year high last spring, the latest inflation numbers have shown easing for the past three months, though are still much higher than the Fed’s 2% target. The Fed’s preferred measure of inflation, the personal consumption expenditures index excluding food and energy, increased 4.4% in December from a year ago, down from the 4.7% reading in November — the slowest annual rate of increase since October 2021.

Meanwhile, the consumer price index, excluding food and energy prices, inched up 0.3% in December, after rising 0.2% in November. Year-over-year, core CPI rose 5.7%, down from the 6% seen in November.