BANGKOK — Asian stock markets experienced a downturn on Thursday, following a significant decline in U.S. stocks, which marked one of their most challenging days of the year. This dip was prompted by the Federal Reserve’s indication that it may implement fewer interest rate reductions in 2025 than previously anticipated.

As expected, the Fed reduced its primary interest rate by a quarter percentage point, bringing it to a range of 4.25% to 4.5%. Meanwhile, other major central banks, including the Bank of Japan, decided to maintain their current rates, with the latter holding its benchmark at 0.25% on Thursday. This decision led to a rise in the dollar’s value relative to the Japanese yen.

In Asia, stock markets saw declines, albeit generally less than 2%. The Nikkei 225 in Tokyo dropped by 0.7%, finishing at 38,813.58, with the dollar trading at 156.44 yen, up from the previous 154.79 yen.

A weaker yen typically results in higher prices for imports in Japan, thereby increasing pressure on the Bank of Japan to adjust its rates. Analysts suggest that a rate hike may occur in January, yet the central bank remains cautious about making drastic changes as it anticipates potential shifts from the newly elected President Donald Trump’s tariff policies.

The Bank of Japan acknowledged “high uncertainties” affecting Japan’s economic outlook, prices, and global economic conditions, expressing its concern over commodity price developments.

Chinese markets also reflected this downtrend, with the Hang Seng index falling 0.5% to 19,760.10, and the Shanghai Composite index decreasing by 0.4% to 3,370.03. In Australia, the S&P/ASX 200 slipped by 1.7% to 8,168.20, while South Korea’s Kospi fell 2% to 2,435.93. India’s Sensex also saw a downturn of 1.1%. In Taiwan, the Taiex was down by 1%, and Thailand’s SET index declined by 1.1%.

On Wednesday, the S&P 500 witnessed a considerable drop of 3%, coming close to one of its steepest losses for the year, settling at 5,872.16. The Dow Jones Industrial Average decreased by 1,123 points, or 2.6%, reaching 42,326.87, while the Nasdaq composite fell by 3.6% to 19,392.69. The Russell 2000 index of small caps faced a 4.4% plunge.

The recent rate cut marked the third adjustment of the year, which began in September as part of efforts to reduce rates from a two-decade peak to bolster the job market. Although Wall Street generally favors lower interest rates, the cut had already been anticipated, and investors were more concerned with future Fed actions for the coming year.

Consequently, expectations around the Federal Reserve’s rate adjustments in 2025 are critical, especially following market highs that occurred 57 times in 2024, driven by hopes for a series of cuts. Projections released by the Fed indicated that, on average, officials expect two more cuts in 2025, translating to a reduction of half a percentage point, a decrease from the four cuts projected just three months ago.

Fed Chair Jerome Powell acknowledged the shift in policy direction, highlighting the strong job market and a recent uptick in inflation as contributing factors. Some officials are also beginning to incorporate the uncertainties associated with the new administration into their considerations. There is rising concern on Wall Street that President-elect Trump’s tariffs and policies could exacerbate inflationary pressures.

Powell articulated the cautious approach: “When the path is uncertain, you go a little slower,” likening the situation to navigating a foggy road or a dark room filled with obstacles.

Following the Fed’s revised outlook for rate cuts in 2025, Treasury yields saw an increase, adding further strain to the stock market. The yield on the 10-year Treasury rose to 4.51%, up from 4.40% the day before, while the two-year yield, closely tied to Fed expectations, climbed to 4.35% from 4.25%.

In notable stock developments, Nvidia, which has been a key player in Wall Street’s growth over past years, fell by 1.1%, continuing a weekslong downturn. The stock is down over 13% from its record high set last month and has witnessed declines in nine out of the last ten trading sessions as its momentum wanes.

In early trading on Thursday, U.S. benchmark crude oil slipped 46 cents to $69.56 per barrel in electronic transactions on the New York Mercantile Exchange, while Brent crude, the international reference, decreased by 42 cents to $72.97 per barrel. The euro experienced an uptick, rising to $1.0396 compared to $1.0355 from earlier.