U.S. Stocks Dive as Fed Signals Fewer Rate Cuts in 2025

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FED,INTEREST RATES,STOCK MARKET

Stocks tumbled after the Federal Reserve indicated a slower pace of rate cuts in 2025, disappointing investors who had anticipated further stimulus for the economy.

U.S. stocks plunged to one of their worst days of the year on Wednesday after the Federal Reserve hinted at delivering fewer interest rate cuts in 2025 than previously anticipated. The S&P 500 dropped 2.9%, nearing its biggest decline for the year, while the Dow Jones Industrial Average plummeted 1,123 points, or 2.6%, and the Nasdaq composite slid 3.6%. The Fed reduced its benchmark interest rate for the third time this year, continuing its aggressive rate cuts initiated in September.

While this reduction was widely anticipated, the key focus was on the extent of future cuts in 2025. Wall Street had been buoyed by expectations of a series of rate cuts in 2025, contributing to the U.S. stock market's numerous all-time highs this year. However, Fed officials' projections indicated a median expectation of only two more cuts in 2025, representing a significant decrease from the four cuts projected three months ago. Fed Chair Jerome Powell acknowledged the transition to a new phase in the rate-cutting cycle. He cited the robust performance of the job market and recent upticks in inflation as reasons for the Fed's shift in stance.

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