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US markets end deeply in red after Fed signals fewer rate cuts than expected for 2025

19 Dec 2024 Evaluate

The US markets ended deeply in red on Wednesday after the Federal Reserve announced its widely expected decision to lower interest rates by a quarter point but forecast fewer than previously estimated rate cuts next year. The Fed said it decided to lower the target range for the federal funds rate by 25 basis points to 4.25 to 4.50 percent, matching the rate cut seen in early November. With the rate cut almost universally expected, the focus of the announcement was on Fed officials' latest economic projections. The latest projections suggest rates will be in a range of 3.75 to 4.0 percent by the end of 2025 compared to the range of 3.25 to 3.50 percent forecast in September. Assuming the Fed lowers rates by a quarter point, the projections point to just two rate cuts next year compared to the four previously forecast.

The forecast for fewer rate cuts comes as Fed officials expect inflation to come in hotter than previously estimated in 2025, with consumer price growth expected at 2.5 percent compared to the 2.1 percent forecast in September. During his post-meeting press conference, Fed Chair Jerome Powell said the central bank will be looking for additional progress on inflation before considering further rate cuts, noting annual price growth has recently been moving sideways. Notably, the decision to lower rates at this meeting was not unanimous, as Cleveland Fed President Beth M. Hammack preferred to leave rates unchanged. On the sectoral front, gold stocks moved sharply lower as the price of the precious metal plummeted in after hours trading, dragging the NYSE Arca Gold Bugs Index down by 4.6 percent to its lowest closing level in over four months.

Dow Jones Industrial Average fell 1,123.03 points or 2.58 percent to 42,326.87, Nasdaq dropped 716.37 points or 3.56 percent to 19,392.69 and S&P 500 was down by 178.45 points or 2.95 percent to 5,872.16.  


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