New york: US stocks ended with gains Wednesday after the Federal Reserve cut its policy rate by 25 basis points, as widely expected. The Dow Jones Industrial Average rose 1.05%, or 497.46 points, to close at 48,057.75. Concurrently, the Nasdaq gained 0.33%, or 77.67 points, to end at 23,654.16, while the S and P 500 increased 0.67%, or 46.17 points, to 6,886.68. The Volatility Index (VIX), known as the "fear index," declined by 6.85% to 15.77.

According to Anadolu Agency, the gains came in response to the Fed's decision to reduce the federal funds rate by 25 basis points for the third time this year, setting it at 3.5%-3.75%. The central bank's monetary policy statement highlighted that downside risks to employment have risen recently and that inflation has increased since earlier in the year, remaining "somewhat" elevated. "Job gains have slowed this year, and the unemployment rate has edged up through September. More recent indicators are consistent with these developments," the statement noted.

During the post-meeting press conference, Fed Chair Jerome Powell dismissed the likelihood of a rate hike in future meetings, stating, "I don't think that a rate hike...is anybody's base case at this point. I'm not hearing that." Powell attributed the inflation overshoot primarily to President Donald Trump's tariffs, remarking, "It's really tariffs that's causing most of the inflation overshoot." He added that these tariffs would likely result in a "one-time" price spike, emphasizing, "Our job is to make sure that it is."

Powell also affirmed that the central bank is "well positioned to determine the extent and timing of additional adjustments based on the incoming data, the evolving outlook of the balance of risks." Meanwhile, the Fed's "dot plot," which represents the expectations of 19 different members anonymously, indicated a median projection of 3.4% for the federal funds rate at the end of 2026, suggesting one more rate cut next year. This projection was unchanged from the previous quarter.

Looking further ahead, the Fed forecasted a terminal rate of 3.1% for 2027, implying another rate reduction. The dot plot suggested that the rate is expected to remain steady in 2028. On a related note, the US federal government's budget deficit saw a significant reduction of 53% in November compared to the same month last year, decreasing to $173 billion.