Wall Street witnesses a sharp fall after US federal reserve signals lower cuts in 2025

Wall Street witnessed a sharp fall after the US Federal Reserve cut interest rates but warned that there will be fewer rate cuts in 2025. The latest cuts were announced by Fed Chair Jerome Powell amid questions over its fight to bring down inflation across the US. In the Wednesday press briefing, Powell said that inflation had been “stubborn,” but insisted the central bank believed its rate hikes would continue to erode the pace of price rises.

According to Forbes, Wall Street fell sharply, with the S&P 500 closing down almost 3 per cent as investors raised concerns about the upcoming year. The tech-focused Nasdaq Composite dropped 3.6 per cent. In its last rate cut decision before Trump came to power, the Federal Reserve lowered the benchmark federal funds rate by a quarter of a percentage point to a range of between 4.25 per cent and 4.5 per cent.

While inflation has reduced dramatically since it peaked two years ago, it remained higher than the Fed would like – and has increased in recent months. The rising prices have raised concerns over the progress of the efforts to bring inflation down to the pre-pandemic levels.

Despite all the concerns, Powell maintained that he is optimistic about the US economy. “I think it’s pretty clear we have avoided a recession. I think growth this year has been solid,” the Fed chair said in the press briefing. “The US economy has been remarkable,” he added.

Rising prices remain a constant issue. Will the new president have a solution?

Americans’ frustration with the surge in prices was seen as one of the main reasons why US President-elect Donald Trump got elected in the November 5 race against Vice President Kamala Harris. While Trump has repeatedly pledged to bring inflation down during the campaign trail, he was seen backtracking on his promise.

When asked by Time magazine if his presidency would be a failure if prices did not fall, Trump insisted that he wouldn’t consider his second stint a failure regardless. “I don’t think so. Look, they got them up. I’d like to bring them down. It’s hard to bring things down once they’re up. You know, it’s very hard. But I think that they will,” he remarked.

Trump’s return to the White House has put the Fed and its chair on a rocky path. In the past, Trump repeatedly criticized decisions by the central bank, and his allies have even raised the prospect of curtailing its independence. Powell himself endured strained ties with the president-elect. Last month, the Fed chair made it clear that he would not resign if Trump asked him to step down from the role.

With inputs from agencies.