BANGKOK — Asian stock markets experienced a decline on Thursday, influenced by a significant drop in U.S. stocks the previous day. The decline was prompted by the Federal Reserve’s indication that it may implement fewer interest rate cuts in 2025 than previously anticipated.

The Fed’s decision to reduce its key interest rate by a quarter of a percentage point, bringing it to a range between 4.25% and 4.5%, was expected. Meanwhile, other major central banks, including the Bank of Japan, opted to maintain their rates. The Bank of Japan decided to keep its benchmark rate at 0.25%, a move that contributed to a rise in the dollar against the Japanese yen.

Asian markets saw losses, albeit generally limited to less than 2%. Japan’s Nikkei 225 index dropped by 0.7%, settling at 38,806.70. Midday Thursday saw the dollar trading at 155.24 yen, a rise from 154.79 yen earlier. A weaker yen often leads to higher prices in Japan, which relies heavily on imports, thereby increasing pressure on the Bank of Japan to consider rate hikes. Analysts are predicting a potential increase in January, although they note that the central bank is cautious due to the uncertain impacts of President-elect Donald Trump’s tariff policies.

The Bank of Japan acknowledged significant “high uncertainties” concerning Japan’s economic outlook, including factors related to global economic developments and commodity prices.

Chinese stock markets also faced declines, with the Hang Seng index in Hong Kong falling by 1% to 19,666.12, and the Shanghai Composite index slipping by 0.7% to 3,357.82. Australia’s S&P/ASX 200 decreased by 1.9% to 8,153.80, while South Korea’s Kospi index declined by 1.5% to 2,447.17. Additionally, India’s Sensex index fell by 0.9%. In Taiwan, the Taiex index lost 1.5%, and Bangkok’s SET index dropped by 0.6%.

On the U.S. market front, the S&P 500 index saw a steep decrease of 2.9%, nearly marking its most significant loss for the year, closing at 5,872.16. The Dow Jones Industrial Average fell by 1,123 points, or 2.6%, to end at 42,326.87, with the Nasdaq composite dropping 3.6% to 19,392.69. The Russell 2000 index for small-cap stocks fell sharply by 4.4%.

The Federal Reserve’s recent rate cut marks the third such action in 2023, occurring as part of a series of reductions initiated in September aimed at supporting the job market. Although Wall Street typically reacts positively to lower interest rates, the latest cut had been widely anticipated, prompting investors to shift focus toward the potential for further cuts in the upcoming year.

Expectations for future rate cuts have significant implications, particularly as forecasts of multiple reductions in 2025 have played a role in driving the U.S. stock market to record highs throughout 2024. The Fed’s released projections indicate that the median expectation among officials is now for only two additional cuts in 2025, significantly down from the four cuts anticipated just three months ago.

Fed Chair Jerome Powell noted that the central bank is entering a “new phase of the process,” explaining that the decision to moderate future cuts is influenced by the strength of the job market and rising inflation metrics. Some officials are also considering potential uncertainties linked to the transition to a new presidential administration, with concerns mounting on Wall Street regarding the impact of President-elect Trump’s proposed tariff policies on inflation.

In terms of bond markets, the reduced expectations for cuts in 2025 have led to an increase in Treasury yields, putting additional strain on the stock market. The yield on the 10-year Treasury bond rose to 4.51%, up from 4.40%, while the two-year yield climbed to 4.35% from 4.25%.

In a notable development, Nvidia, a key player in the recent stock rally, saw its shares fall by 1.1%, continuing a downward trend. The stock has declined over 13% from its peak in the previous month and has fallen on nine of the last ten trading days as its momentum wanes.

As for other assets, U.S. benchmark crude oil prices decreased by 41 cents, reaching $69.61 per barrel in electronic trading on the New York Mercantile Exchange, while Brent crude fell by 39 cents to $73.00 per barrel. The euro experienced a slight increase, rising to $1.0377 from $1.0355.