Stocks plunge as Federal Reserve's tilt triggers ‘Black Wednesday’

The December Federal Reserve meeting knocked the wind out of markets, delivering exactly what investors didn’t ask for this holiday season: more volatility, fewer rate cuts ahead, and hawkish posture from Jerome Powell.

The Federal Open Market Committee, as widely expected, delivered a 25-basis-point rate cut, bringing the target range to 4.25%-4.50%.

Yet, the updated economic projections left little room for market cheer. The central bank now anticipates just two additional cuts in 2025, a dramatic shift from the four cuts projected in September.

During the press conference, Powell added fuel to the fire: “From here, it’s a new phase, and we’re going to be cautious about further cuts.”

“We’re significantly closer to neutral,” Powell said, referring to the interest rate level that neither fuels nor stifles economic growth.

Powell struck an optimistic tone about the current state of the US economy, describing it as resilient, highlighting a "remarkable" performance compared to global peers which are struggling with sluggish growth and high inflation.

“When we attend international meetings, the story is how well the US economy is doing,” he said.

When asked about recession risks, Powell dismissed the idea of an imminent downturn. “Most forecasters have been predicting a slowdown in growth for a very long time, and it keeps not happening,” he added.

Driving this recalibrated stance are hotter inflation forecasts. Headline inflation for 2025 is now expected to hit 2.5%, up from 2.1%, while core inflation—excluding food and energy—is also seen at 2.5%, up from the previously 2.2%.

Powell reiterated the Fed’s resolve to achieve its 2% target, though he conceded it might take “another year or two.”

When asked whether the Fed might