Global financial markets tremble after cautious signals from the Fed

After a 2-day meeting, the Fed cut interest rates for the third consecutive time, lowering it by 25 basis points to 4.25-4.5% per year, equivalent to the level in December 2022. However, the Fed sent cautious signals by adjusting its forecast for rate cuts and raising the long-term neutral interest rate to 3%.

Impact on financial markets:

1. U.S. stocks plummet:

• The Dow Jones index fell by 1,123 points, marking the first series of 10 consecutive declines since 1974.

• The S&P 500 decreased nearly 3%, and the Nasdaq Composite dropped 3.6%.

2. Gold prices sharply decline:

• From $2,650/ounce down to $2,580/ounce before recovering to $2,610/ounce.

3. Bitcoin loses value:

• From $106,000/BTC down to $100,000/BTC.

4. The USD strengthens significantly:

• The DXY index increased from 107 points to over 108 points.

Causes of fluctuations:

• Expectations for rapid rate cuts quickly faded as the Fed projected only 2 rate cuts in 2025 and maintained caution in the coming period.

• The Fed focuses on controlling inflation, which remains above the 2% target.

Political context:

• Financial markets are also affected by uncertainty regarding the policies of elected President Donald Trump, with the Fed stating it will closely monitor developments.

Conclusion:

The decisions and forecasts from the Fed, along with the political situation in the U.S., have caused significant fluctuations in global markets, requiring investors to exercise caution before upcoming developments.