Global financial markets are in turmoil. Gold, US stocks and Bitcoin prices have plummeted after the Fed became more cautious about the US economy when Donald Trump took office.
After a two-day meeting that ended early on December 19 (Vietnam time), the US Federal Reserve (Fed) lowered interest rates for the third consecutive time, reducing them by 25 basis points to 4.25-4.5%/year, returning to the level of December 2022. However, the notable point is the overall caution for the coming period.
Accordingly, the dot-plot signal - showing the future interest rate expectations of each member of the Fed's Federal Open Market Committee (FOMC) - shows that there will be only 2 interest rate cuts in 2025, instead of 4 times compared to the signal in September.
In 2026, the signal shows that the Fed will have 2 interest rate cuts and in 2027, 1 time.
The Fed also adjusted its long-term "neutral" interest rate to 3%, 0.1 percentage points higher than its September forecast. This is an interest rate that is considered not to restrain the US economy.
Another notable event occurred at the meeting. For the second time in a row, an FOMC member voted against a rate cut. Cleveland Fed President Beth Hammack voted to keep rates unchanged. Governor Michelle Bowman did the same at the November meeting. This has not happened since 2005.
The Fed forecasts that US economic growth will slow to 1.8% over the long term, compared with an estimate of 2.5% this year. The Fed also raised its inflation forecast higher than previously, with core inflation at 2.8%.
World financial markets are in turmoil
The US stock market plunged immediately after the Fed's decision. The industrial index fell 1,123 points (equivalent to a decrease of nearly 2.6%) to 42,327 points, marking the first 10 consecutive sessions of decline since 1974.
Previously, the Dow Jones had reached dozens of peaks in 2024 and surpassed the 45,000 point threshold for the first time on December 4.
The broad US stock index S&P 500 also lost nearly 3% to 5,872 points. The technology index Nasdaq Composite lost nearly 3.6% to 19,393 points.
Gold prices plummeted from $2,650/ounce last night (Vietnam time) to nearly $2,580/ounce early this morning, before recovering to $2,610/ounce as of 8:40 a.m. on December 19.
The cryptocurrency market is also in turmoil. Bitcoin fell from $106,000/BTC yesterday to $100,000/BTC today.
The USD increased sharply. The DXY index (measuring the USD's fluctuations against a basket of 6 major currencies in the world) jumped from below 107 points to above 108 points.
Global financial markets have been shaken largely by the disillusionment of expectations for a sharp US interest rate cut. US monetary policy makers are cautious as Donald Trump is about to take office.
Fed Chairman Jerome Powell said the Fed has cut interest rates by one percentage point from their peak, making current monetary policy significantly less tight. The Fed is more cautious when considering further adjustments.
According to Mr. Powell, inflation is the Fed's top concern. The downward trend in inflation remains. But in reality, inflation is still quite high above the 2% target.
Mr. Powell also emphasized that the number of interest rate cuts in 2025 will depend entirely on actual economic data.
Some members also made preliminary assessments of the potential impact of US President-elect Donald Trump's policy proposals. But all that was left was a statement that the Fed would closely monitor these policies.
Source: https://vietnamnet.vn/the-gioi-chao-dao-gia-vang-co-phieu-bitcoin-lao-doc-sau-tin-hieu-tu-fed-2354066.html
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