‘Today’s Fed announcement put more uncertainty on the table,’ says an investment adviser.
The Dow Jones Industrial Average has extended its losing streak to 10 days, the first skid since 1974, as the Federal Reserve’s interest rate outlook for 2025 disappointed investors.
The Fed announced on Wednesday that it expects fewer interest rate cuts in 2025 due to inflation pressures. Following the announcement, the blue-chip index tanked by 1,123.03 points, or 2.58 percent, to 42,326.87.
Its sister indexes also crashed to finish the Dec. 18 trading session. The tech-heavy Nasdaq Composite Index plummeted by 716.37 points, or 3.56 percent, to 19,392.69. The S&P 500 declined by 178.45 points, or 2.95 percent, to 5,872.16.
U.S. Treasury yields, particularly the long-term ones, rocketed midweek. The benchmark 10-year yield soared nearly 13 basis points to above 4.51 percent. The 20-year yield reached 4.77 percent, while the 30-year bond topped 4.66 percent.
The greenback also spiked following the latest Fed developments. The U.S. dollar index, a measure of the buck against a weighted basket of currencies, surged more than 1 percent to above 108.00.
Wall Street shrugged off the Fed’s quarter-point rate cut at the December policy meeting, which lowered the benchmark federal funds rate to a target range of 4.25–4.5 percent.
Instead, investors centered their attention on the central bank’s outlook for the next year.
According to the updated Summary of Economic Projections, officials see only two rate cuts next year, totaling 50 basis points. The dot plot, a gauge of individual members’ forecasts for interest rates, suggested the median benchmark federal funds rate would decline to 3.9 percent by the end of 2025.
Policymakers previously penciled in four quarter-point rate cuts at the September meeting for a total of 1 percent.
The Fed expects two more rate cuts in 2026 and one reduction in 2027.
On a long-term basis, the rate-setting Federal Open Market Committee anticipates the neutral rate would be 3 percent. This is little changed from what officials wrote in their September forecasts.
By Andrew Moran
