Federal Reserve Cuts Interest Rates: Cautious Outlook Damps Market Optimism

On December 18, the Federal Reserve cut its interest rate by 25 basis points to 4.25%-4.50%, but projected only two additional cuts for 2025, disappointing investors. This cautious outlook, attributed to persisting inflation risks and uncertainties surrounding President-elect Trump's policies, triggered a sharp decline in U.S. stock markets, with the Dow dropping over 1,123 points. Investors expressed confusion over Fed Chair Jerome Powell’s mixed messaging and the perceived disconnect between market expectations and current economic realities. Analysts noted the Fed's decision was met with skepticism, highlighting the necessity for a more tempered approach amid turbulent economic conditions.