BANGKOK — Global markets took a hit on Thursday following an abrupt decline in U.S. equities, a reaction influenced by the Federal Reserve’s indication that it may implement fewer rate reductions in 2025 than previously anticipated.

The Federal Reserve reduced its main interest rate by a quarter percentage point to a range between 4.25% and 4.5%, a move that was widely expected. Meanwhile, the Bank of England likely kept its policy rate steady, while the Bank of Japan maintained its benchmark rate at 0.25%, which led to a stronger dollar relative to the Japanese yen. As a result, the dollar traded at 157.04 yen, marking a 1.5% increase from 154.79 yen the previous day.

While world markets faced declines, most fell by less than 2%. In the early hours of European trading, the UK’s FTSE 100 saw a decline of 1.2% to 8,102.36, paralleling a similar drop for France’s CAC 40, which fell to 7,299.99. Germany’s DAX index decreased by 1% to 20,045.12.

Looking at future projections, the S&P 500 futures rose by 0.4%, and those for the Dow Jones Industrial Average increased by 0.3%. In Asia, Tokyo’s Nikkei 225 suffered a 0.7% drop to 38,813.58.

A weaker yen is likely to elevate prices within Japan, which heavily relies on imports, thereby increasing pressure on the Bank of Japan to raise interest rates. Analysts are projecting a potential BOJ rate increase in January, although they believe the central bank is cautious about implementing drastic changes as it awaits any potential shocks stemming from incoming President Donald Trump’s tariff policies.

The Bank of Japan acknowledged “high uncertainties” surrounding both Japan’s business environment and external economic factors, including commodity price fluctuations.

Chinese stock markets also experienced losses; the Hang Seng index fell by 0.6% to 19,752.51, while the Shanghai Composite index decreased by 0.4% to 3,370.03. In Australia, the S&P/ASX 200 plunged by 1.7% to 8,168.20, with South Korea’s Kospi shrinking by 2% to 2,435.93. India’s Sensex experienced a drop of 1.2%, and the Taiex in Taiwan lost 1%. The SET index in Bangkok dropped by 1.5%.

On Wednesday, the S&P 500 dropped by 3%, nearing one of its most substantial hits of the year. The Dow plummeted 1,123 points, equivalent to a 2.6% drop, while the Nasdaq composite fell by 3.6%. The Russell 2000 index, which represents smaller companies, saw a staggering decline of 4.4%.

This recent interest rate cut marked the Fed’s third reduction of the year, a strategy initiated in September as the central bank aimed to bolster the job market. While Wall Street often welcomes lower interest rates, the announcement of this cut was already incorporated into market expectations, causing investors to turn their attention toward the Fed’s future rate-cutting plans for the upcoming year.

Significant implications hinge on the Fed’s decisions, especially considering that anticipated rate cuts in 2025 have helped the U.S. stock market reach all-time highs 57 times in 2024 alone. Fed officials projected on Wednesday that they now expect only two additional cuts to the federal funds rate in 2025, which amounts to a half percentage point reduction, a decrease from the prior expectation of four cuts just three months prior.

According to Fed Chair Jerome Powell, “We are in a new phase of the process.” He explained that the reason behind the Fed’s cautious approach to rate cuts relates to the overall strong performance of the job market and recent upticks in inflation indicators.

Powell noted that some Fed officials are beginning to factor in uncertainties tied to the incoming administration in the White House, expressing growing concerns on Wall Street that President-elect Trump’s inclination towards tariffs and different economic policies might exacerbate inflation. “When the path is uncertain, you go a little slower,” Powell said, comparing it to navigating through fog or a dark room filled with furniture.

In early trading on Thursday, U.S. benchmark crude oil saw a slight decrease of 4 cents, landing at $69.98 per barrel on the New York Mercantile Exchange. Internationally, Brent crude fell by 5 cents to $73.34 per barrel. Additionally, the euro appreciated against the dollar, rising to $1.0416 from $1.0355.