Dow Jones falls 1,100 points after Fed scales back interest rate cut plans

The stock market plunged Wednesday after the Federal Reserve lowered its forecast for lower interest rates for next year.

The Dow Jones Industrial Average fell about 1,100 points, or 2.5%, the index’s biggest decline since August.

THEThe &P 500 fell nearly 3%, while the tech-heavy Nasdaq fell about 3.5%.

The Fed cut interest rates by a quarter of a percentage point on Wednesday, but the central bank also announced new forecasts calling for smaller interest rate cuts than expected just a few months ago.

The Fed’s forecast released Wednesday said it expects only a half-percentage-point rate cut next year and another 0.5% cut in 2026. In September, the Fed had forecast a reduction of 0.5 percentage points next year and a further reduction of 0.5% in interest rates. 2026.

Lower interest rates generally stimulate economic activity in the long term, keeping the economy growing and preserving the job market. They also tend to drive up corporate profits and stock prices.

Speaking at a news conference in Washington, D.C., on Wednesday, Fed Chairman Jerome Powell said the central bank may proceed at a slower pace in future rate cuts, in part because It has now significantly lowered interest rates.

Powell also said a recent resurgence in inflation had influenced the Fed’s expectations, noting that some policymakers were considering uncertainty related to potential policy changes under Trump.

“It’s common sense to think that when the path is uncertain, you slow down a little,” Powell said. “It’s not unlike driving on a foggy night or walking through a dark room full of furniture.”