Federal Reserve keeps the interest rates unchanged at 3.7%; Dow Jones drops 400 points after fewer rate cut expectations

The US markets clawed back some early losses on Wednesday after of the Federal Reserve kept the interest rates unchanged at 3.75%. The Dow Jones erased over 385 points or 0.9%, the S&P 500 fell 0.75%, and the tech-heavy NASDAQ traded nearly 200 points lower on Wednesday at 11:40 pm (IST).The headline interest rates came in line with the investing.com estimates at 3.75%.

The central bank reduced the expectations of further rate cuts this year as the latest dot plot projections show a single rate cut this year, as compared to at least two rate cuts in 2026 showed in December 2025 meeting. In addition, the inflation expectations for 2026 are also revised higher to 2.7% for the core PCE inflation. The Federal Reserve also said the implications of the Middle East crisis are uncertain.Policymakers noted that the core economic activity remains robust, expanding at a solid pace.

Gold and silver prices slumped over 3% as the treasury yields gained after the rate trajectory indicates higher rates for longer period of time.

Investors trimmed their bets on the US equities after the hotter-than-expected Producer Price Index reduced the hopes of a rate cut by the Federal Reserve. The Labour Department said the PPI jumped 3.4%, higher than the economists’ estimates of 2.9%. The price inflation is likely to be influenced by higher energy prices amid the ongoing Middle-East crisis.

Meanwhile the crude oil prices held on to the gains near $109/ barrel levels after Israel and the US attacked Iran’s largest gas treatment plant near South Pars, prompting a major escalation in the region.