US stocks fell sharply after the Federal Reserve cut interest rates but signalled that it may make fewer reductions in 2025 than investors had expected. The reaction reflected concern that borrowing costs could remain higher for longer, limiting support for businesses, consumers and share prices.

The Fed lowered its main rate by a quarter of a percentage point, its third cut since September, taking the target range to 4.25%–4.50%. It projected only two further quarter-point cuts in 2025, compared with four previously forecast; the Dow Jones Industrial Average dropped 1,123 points, or 2.6%, while the S&P 500 fell 2.9% and the Nasdaq declined 3.6%.