This report is from today's CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. The Federal Reserve (Fed) raised interest rates by 25 basis points on Wednesday, taking its overnight borrowing rate to a target range of 4.25%-4.5%. In the Fed's dot plot indicating expectations for rates in the years ahead, the central bank mostly indicated a path for continued rate hikes.
The market reacted negatively to the Fed's forecast that monetary policy in 2025 will remain tighter than previously forecast. Micron Technology's stock price tumbled after the company lowered its revenue expectations for the current quarter. The stock market took a battering after digesting the Fed's forecast that monetary policy in 2025 will remain tighter than previously forecast. CNBC's Sarah Min looks at whyWednesday's dramatic sell-off in markets is a stark reminder that forecasts influence stock movements much more than current circumstances. The Fed cut its key interest rate by 25 basis points. Borrowing costs will go down and corporate investment should be stimulated, which should lead to job creation and boost growth. That, in turn, theoretically pushes up stocks. But investors were already confident about the Fed's cut Wednesday. Prior to the conclusion of the Fed's December meeting, the futures market indicated a 98% chance of a 25 basis points cut, according to the. That means investors had already priced in the benefits of the rate reduction into stocks. In other words, yesterday's cut would have little bearing on stock prices. Investors were perhaps pricing in even more optimism than that single reduction in rates
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