The operators were waiting for the start of a correction, and they got it. Wall Street fell sharply on Wednesday, December 18: the S&P 500 index which represents large companies fell by 2.95% while the technology-rich Nasdaq index fell by 3.56%. Tesla lost more than 8%, Amazon 4.6% and Microsoft 3.7%. The cause is the American Federal Reserve (Fed, the central bank), which has stunned the markets.
Certainly, its monetary policy committee lowered its key rates by a quarter of a point, which makes a cumulative drop of one point since September, with the interest rate now in a range between 4 .25% and 4.5%. But central bankers are now predicting a serious slowdown in the decline in 2025, and that’s all the markets were interested in.
According to projections published on Wednesday, they expect to only lower rates by 0.5 points compared to 1 point forecast in September, during the latest forecasts. The cause is inflation, which is proving more difficult to eradicate than expected. Fed President Jerome Powell and his colleagues even revised it upwards, estimating that it would reach 2.5% in 2025, compared to 2.1% expected in September.
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Tensions persist on housing prices
The cause is not the job market which has now normalized with an unemployment rate of around 4.2%, but the tensions which persist on housing prices. Added to this are the plans of Donald Trump, who intends to increase customs duties on imports upon his return to the White House on January 20, 2025, and intends to expel hundreds of thousands of workers without regular work permits but that drive the economy.
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Jerome Powell, in his press conference, did not attempt to allay concerns: “We are standing still on twelve-month inflation”he lamented. He’s not worried about the job market. “We believe the job market continues to cool. [Mais] it doesn’t calm down quickly, nor in a way that really causes concern. » The robust health of the economy means that the concern is more about inflation than about employment.
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