The Federal Reserve drastically cuts interest rate expectations, causing a global market collapse
On December 19, the Federal Reserve announced a scheduled interest rate cut of 25 basis points on Wednesday, but significantly raised future policy interest rate expectations and inflation expectations. It is expected to only cut rates twice next year for a total of 50 basis points, half less than previously expected. According to monitoring, after the release of the Fed's dot plot + economic expectation summary, risk aversion sentiment sharply increased and all three major US stock indices fell. The SP 500 index closed down by 2.95%, Dow Jones dropped by 2.58%, marking ten consecutive days of decline - its longest losing streak since 1974; Nasdaq closed down by 3.56%. Tesla fell more than 8%, leading tech giants' losses. Cryptocurrency concept stocks generally declined with MSTR closing down by9.52% and Coinbase falling by10.2%. The Fed's actions led to a crash in US stocks and a significant correction in the cryptocurrency market.
BTC broke below $100k as Jerome Powell’s comment that "the Federal Reserve neither allows nor intends to hold Bitcoin" added selling pressure on the market causing Bitcoin's drop as high as6 .2% before cutting off at $99,235 USD . Ethereum briefly plunged to $3542 USD , dropping up to7 .27%; Altcoins generally experienced double-digit declines over past24 hours , with liquidation amounts across all cryptocurrencies reaching$842 million USD , deepening market panic.
In terms of forex commodities, following aggressive cuts in interest rate expectations from the Fed,the dollar index rose over1 %to reach two-year highs ; gold prices slid over1 %to hit one-month lows ; U.S crude oil inventories decreased pushing U.S oil higher,but slower pace of rate cuts suppressed outlook for oil demand,resulting in an increase followed by gradual decrease erasing gains.The Fed’s published “dot plot” shows it expects only two more rate cuts by 2025, which is more hawkish than expected compared to the September dot plot prediction, causing extreme market fear. Fed officials also expect two more rate cuts in 2026 and one more in 2027.
