Major stock indexes fell sharply on Wednesday after the U.S. Federal Reserve cut interest rates by a quarter of a percentage point, but officials said future rate cuts would be narrower and inflation would persist further. showed the outlook.
The Dow Jones Industrial Average fell more than 500 points, or 1.2%. The Nasdaq Composite fell 2%. The S&P 500 fell 1.5%. The Russell 2000 index of small companies fell more than 2.6%.
In Fed officials' forecasts released at other Federal Open Market Committee meetings, the median forecast for rate cuts next year is just two, down from four the last time the Fed announced its forecast in September. . The Fed currently expects the federal funds rate to be 3.9% at the end of next year, 0.5 percentage points higher than previously expected.
The Fed's outlook also indicates that interest rates will rise. The Fed now expects its benchmark interest rate to be 3.4% at the end of 2027, a year later than it expected to reach that level just a few months ago. In September, the Fed predicted interest rates would be 2.9% by the end of 2027.
The long-term outlook has been raised again, this time from 2.9% to 3.0%. The Fed has been steadily raising this rate after years of predicting a long-term trend of 2.5%.
Similarly, the Fed currently believes that inflation will remain high for an extended period of time. The new forecast puts the median inflation forecast at the end of next year at 2.5%, up from the 2.1% predicted in September. Moreover, this is higher than the Fed expects inflation to be this year, so the Fed expects inflation to rise further.
