NEW YORK, Dec 18 – U.S. stocks fell sharply on Wednesday, with all three major indexes experiencing their biggest losses in months. The decline followed the Federal Reserve’s decision to lower interest rates by a quarter of a percentage point. However, the market was disappointed by the Fed’s projections, which signaled a slower pace of rate cuts in 2025 than many investors had hoped for.
Fed Cuts Rates, but Outlook Remains Cautious
The Federal Reserve reduced its benchmark interest rate by 25 basis points, bringing it to a range of 4.25%-4.50%. In its summary of economic projections (SEP), the central bank indicated it expects to reduce rates by a total of just 0.5 percentage points by the end of 2025. This more cautious outlook comes amid a resilient labor market and a recent slowdown in the pace of inflation.
The market’s reaction reflected concerns that the Fed’s slower rate-cutting path could lead to a prolonged period of higher interest rates, dampening investor optimism about future economic growth.
