Meme of the Day | Powell's Hawkish Tone Sinks U.S. Stock Market: $1.5 Trillion Wiped Out

The Federal Reserve has reduced its benchmark interest rate for the third time in a row, lowering it by 25 basis points to a range of 4.25% to 4.5%.

However, officials have signaled a more cautious approach for 2025, anticipating only two rate cuts next year, down from the four previously projected.

Fed Chair Jerome Powell stated, With today's action, we have lowered our policy rate by a full percentage point from its peak and our policy stance is now significantly less restrictive. He emphasized the need for further progress on inflation before additional rate reductions. 

The decision led to a significant market downturn, with the S&P 500 falling by 2.95% and the Dow Jones Industrial Average dropping over 1,100 points, marking its 10th consecutive decline. This resulted in a loss exceeding $1.5 trillion in U.S. stock market value. Additionally, U.S. Treasury yields rose, with the two-year note's yield reaching 4.33%. 

The Federal Open Market Committee voted 11-1 in favor of the rate cut, with Cleveland Fed President Beth Hammack dissenting, preferring to maintain the current rates. 

Powell also noted that while the policy stance is now less restrictive, interest rates continue to meaningfully restrain economic activity. He mentioned that the Fed is on track to continue to cut, but will proceed cautiously, requiring more evidence of inflation reduction before making further adjustments. 

The revised forecasts indicate that only five officials support more than two rate cuts next year, reflecting a more conservative outlook amid persistent inflation concerns. 

In response to potential economic policies from the incoming administration, Powell stated that it is very premature to try to make any kind of conclusion, highlighting the uncertainty surrounding future fiscal measures.