The U.S. dollar surged, and global stock markets tumbled after U.S. Federal Reserve (Fed) Chair Jerome Powell indicated a slower pace of interest rate cuts next year. The Korean won-U.S. dollar exchange rate surpassed 1,450 won for the first time in 15 years, marking the weakest level since the global financial crisis.
The Fed on Dec. 18 lowered its benchmark interest rate by 0.25 percentage points to a range of 4.25–4.5%. During a press conference, Powell noted that the Fed has “reduced the policy rate now by 100 basis points” and described the shift as entering “a new phase” in the adjustment process. He added that the U.S. economy is “performing very well” but warned that if inflation remains unexpectedly high, the Fed could “dial back policy restraint more slowly.” Powell also highlighted that the Fed’s decision included a reference to the “extent and timing” of rate adjustments in the post-meeting statement, signaling that the central bank is “at or near a point” where a slower pace of further adjustments would be appropriate. The Fed has previously used terms like “timing” and “extent” to indicate a pause in rate changes.
Federal Reserve officials forecast the benchmark rate to fall to 3.9% by the end of next year, implying two more 0.25-percentage-point cuts. This is half the four cuts projected in September, reflecting concerns that policies from U.S. President-elect Donald Trump, such as tariff hikes and the expulsion of undocumented immigrants, could drive inflation higher. Analysts also expect heightened tensions between the incoming Trump administration and the Fed.
In response to Powell’s remarks, the U.S. dollar index, which measures the greenback against major currencies, surged from 106 to 108. The won-dollar exchange rate closed at 1,451.9 won on Dec. 19, up 16.4 won, marking the first time since March 2009 that the rate exceeded 1,450 won. U.S. stock markets also plunged, with the Dow Jones Industrial Average falling 2.58%, the S&P 500 dropping 2.95%, and the Nasdaq Composite losing 3.56%. The Dow extended its losing streak to 10 consecutive trading sessions, the longest since October 1974. Asian markets followed the downward trend, with South Korea’s KOSPI and KOSDAQ shedding 1.95% and 1.89%, respectively, while Japan’s Nikkei 225 fell 0.69%.
