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On December 19, the Federal Reserve cut interest rates by 25 basis points as expected, suggesting a slowdown in rate cuts. The US stock market fell, erasing earlier gains. The Dow Jones Index is expected to fall for the tenth consecutive trading day, which would be the longest single-day decline since an eleven-day drop in October 1974. All eleven major sectors of the S&P 500 index were down, with real estate leading the decline. Higher interest rates are typically seen as a drag on the stock market, increasing the appeal of lower-risk assets while suppressing companies' ability to increase earnings.

On December 19, Federal Reserve Chairman Powell explained at a press conference why higher inflation than the Fed's target can be compatible with further rate cuts. He stated that even if next year's inflation rate only drops to 2.5%, the Fed may still cut rates as shown in the dot plot because inflation will be moving in the right direction. Powell further explained that if next year's core PCE inflation annual rate drops to 2.5%, what we see is meaningful progress in reducing inflation. According to FOMC's latest quarterly economic forecast summary, the Fed expects PCE and core PCE inflation to only drop to 2.5% by 2025, which is still above the Fed's target of 2%, while it anticipates two rate cuts by then.