The U.S. Federal Reserve reduced interest rates by a quarter percentage point but signaled a slower pace of easing next year. This move drove the U.S. dollar to its highest level in two years and triggered a sell-off in both domestic and international stock markets.<\/p>\n
The Federal Open Market Committee (FOMC) voted on Wednesday to lower the benchmark interest rate to 4.25\u20134.5%, marking the third consecutive cut. The lone dissenting vote came from Cleveland Fed President Beth Hammack, who favored maintaining the current rates.<\/p>\n
Officials highlighted concerns about persistent inflation, projecting fewer rate cuts for 2025 than previously expected. Reflecting these worries, policymakers also raised their inflation forecasts for the coming year. Following the announcement, Fed Chair Jay Powell remarked that the current policy settings were \u201csignificantly less restrictive,\u201d indicating the Fed\u2019s inclination to adopt a more cautious approach to further easing.<\/p>\n
\u201cThis decision was a \u2018closer call\u2019 than prior meetings,\u201d Powell noted, emphasizing that inflation trends remain \u201csideways\u201d while risks to the labor market are \u201cdiminishing.\u201d<\/p>\n
Aditya Bhave, senior U.S. economist at Bank of America, described the Fed\u2019s message as \u201cunabashedly hawkish.\u201d He pointed to the shift in officials\u2019 2025 forecasts, which now anticipate just two quarter-point rate cuts instead of three, calling it a \u201cwholesale shift.\u201d<\/p>\n
JPMorgan Chase, a key player in U.S. bond markets, noted that money markets are pricing in only a 0.31 percentage point rate cut in 2025. This outlook, significantly tighter than the bank\u2019s earlier 0.75-point forecast, underscores the magnitude of the Fed\u2019s policy shift.<\/p>\n
The decision triggered a sharp sell-off on Wall Street, with the S&P 500 falling 3% and the tech-heavy Nasdaq Composite dropping 3.6%. High-profile winners of the 2024 rally were hit hard, including: Tesla, down 8.3%; Meta (Facebook’s parent company), down 3.6%; Amazon, down 4.6%.<\/p>\n
Smaller companies, often seen as more sensitive to US economic fluctuations, also suffered. The Russell 2000 index declined 4.4%.<\/p>\n
In Asia, stocks fell in early Thursday trading. Benchmarks in South Korea and Taiwan dropped 1.8% and 1.6%, respectively. Meanwhile, U.S. government bond prices fell, driving the yield on two-year Treasuries\u2014sensitive to Fed policy\u2014up by 0.11 percentage points to 4.35%.<\/p>\n
The U.S. dollar surged 1.2% against a basket of six major currencies, reaching its strongest level since November 2022. According to Wells Fargo senior economist Mike Pugliese, the currency had already been rising on expectations of inflationary pressures following Donald Trump\u2019s election victory last month. However, Wednesday\u2019s Fed decision \u201cpoured more petrol on the fire.\u201d<\/p>\n
The South Korean won dropped to a 15-year low against the dollar, while the Japanese yen weakened 0.5%.<\/p>\n","protected":false},"excerpt":{"rendered":"
The U.S. Federal Reserve reduced interest rates by a quarter percentage point but signaled a slower pace of easing next year. This move drove the U.S. dollar to its highest level in two years and triggered a sell-off in both domestic and international stock markets. The Federal Open Market Committee (FOMC) voted on Wednesday to […]<\/p>\n","protected":false},"author":1,"featured_media":6819,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"ep_exclude_from_search":false,"footnotes":""},"categories":[176],"tags":[1111,189,503,2440,2230,4339],"class_list":["post-6818","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-america","tag-dollar","tag-fed","tag-headline","tag-interest-rate","tag-jay-powell","tag-the-federal-open-market-committee-fomc"],"yoast_head":"\n