Stock markets fell on Wednesday after the Federal Reserve lowered its expectations for interest rate cuts next year.
The Dow Jones Industrial Average fell about 1,100 points, or 2.5%, the index’s biggest drop since August.
SThe &P 500 fell nearly 3%, while the tech-heavy Nasdaq fell about 3.5%.
The Fed cut interest rates by a quarter of a percentage point on Wednesday, but the central bank also announced a new forecast to cut interest rates more than expected a few months ago.
The Fed’s forecast on Wednesday said it expects only half a percentage point of rate cuts next year and another half a percentage point in 2026. 2026
Lower interest rates typically stimulate economic activity in the long run, keeping the economy growing and supporting the labor market. They also increase company profits and stock prices.
At a news conference in Washington, DC, on Wednesday, Fed Chairman Jerome Powell said the central bank may proceed at a slower pace with future rate cuts, in part because it has lowered interest rates significantly.
Powell also said the recent rebound in inflation had weighed on the Fed’s expectations, noting that some officials attributed the uncertainty to Trump’s policy changes.
“It’s common sense to think that when the going gets rough, you slow down a little bit,” Powell said. “It’s not like driving on a foggy night or walking in a dark room full of furniture.”
