WASHINGTON — U.S. retail stocks got a boost after the Federal Reserve on Thursday raised its benchmark lending rate a quarter-point to 5.25 percent and suggested that more increases were not a certainty.

The Standard & Poor’s Retail Index increased 8.53 points, or 1.9 percent, to 455.37. Since the Fed began raising interest rates in June 2004, the S&P Retail Index is up 13.5 percent, while the overall market has increased 7.2 percent.

Shares of Wal-Mart Stores Inc., a component of the Dow Jones Industrial Average, rose 79 cents, or 1.7 percent, to $48.71. Other retail stocks that climbed included Gap Inc., up 55 cents, or 3.3 percent, to $17.44; Kohl’s Corp., $1.85, or 3.3 percent, to $58.77; Urban Outfitters Inc., 53 cents, or 3.3 percent, to $16.71; Target Corp., 86 cents, or 1.8 percent, to $49.32; Federated Department Stores, 53 cents, or 1.5 percent, to $36.41; J.C. Penney Co. Inc., 71 cents, or 1.1 percent, to $67.69, and J. Crew Group, 83 cents, or 3.25 percent, to $26.38.

Overall, stocks climbed to their biggest gains since 2003 after the Federal Open Market Committee increased rates for the 17th consecutive time on interest charged on loans between banks, which influences everything from home mortgages to car loans.

The Fed said its next rate decision in August will depend on key economic indicators.

“The committee judges that some inflation risks remain,” the panel said in a statement. “The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth.”

The committee also said, “Recent indicators suggest that economic growth is moderating from its quite strong pace earlier this year.”

Wall Street appeared to conclude that the Fed might pause after raising rates steadily during the last two years to tamp down inflation. The Dow Jones Industrial Average soared 217.24 points, or 2 percent, to close at 11,190.80. The Nasdaq climbed 62.54, or 3 percent, to 2174.38.

“The Fed is giving itself maximum room to maneuver,” Global Insight chief economist Nariman Behravesh wrote in a report. “We could see anywhere from a 25-basis-point to a 75-basis-point increase in the Fed funds rate over the next six months.”

This story first appeared in the June 30, 2006 issue of WWD. Subscribe Today.

The rate hike was expected, especially since a midmonth report that the core rate of inflation, which factors out prices on food and energy goods, grew a higher-than-expected 0.3 percent last month.

“The fact that the market had this herky-jerky response to the Fed is the flavor of the moment,” said Ken Goldstein, an economist at the Conference Board. “Clearly, there’s not going to be a quick return, no matter what the Fed does, to strong economic growth or profit growth for the next six months.”

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