The Dow Jones Industrial Average and other indices declined sharply after the Federal Open Market Committee announced a quarter percentage point reduction in interest rates on Wednesday afternoon and just two more interest rate cuts in 2025. With that, the Dow had its first ten-day losing streak, the longest since 1974.
In its final interest rate decision of the year, the Fed implemented its third consecutive cut, bringing the interest rate down to a range of 4.25% to 4.5%.
“Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low,” the FOMC said in a statement. “Inflation has made progress toward the Committee’s 2 percent objective but remains somewhat elevated.”
The central bank indicated that it could carry out just two more reductions to the federal funds rate in 2025, given quarter-point cuts, according to its updated Summary of Economic Projections.
Fed Chair Jerome Powell similarly signaled that the Fed will take a “more cautious” approach to monetary policy next year.
“As for additional cuts, we’re going to be looking for further progress on inflation as well as continued strength in the labor market,” Powell said in a press conference Wednesday. “And as long as the economy in the labor market are solid, we can be cautious as we consider further cuts.”
Powell said that the decision to cut rates was a “closer call” than previous reductions, but that the FOMC ultimately decided it was “the right call” to balance inflation and labor market goals.
After the market closed, the Dow was down over 1,100 points, or 2.5%. The S&P 500 and the tech-heavy Nasdaq lost 2.9% and 3.5%, respectively.
Moreover, Nvidia (NVDA) stock, which declined earlier this week, bounced back on Wednesday. Micron Technology (MU) is set to announce its quarterly results after the closing bell.
— Rocio Fabbro contributed to this article.
