The Federal Reserve’s signal that it would move to slower rate cuts in 2025 more quickly than investors expected sent U.S. stocks tumbling on Wednesday. The S&P 500 fell 2.9%, suffering one of its steepest declines this year, and the Dow Jones Industrial Average fell 2.6%, losing 1,123 points. The Nasdaq composite of tech-heavy stocks fell 3.6%.

The Federal Reserve cut interest rates for the third time this year, raising the federal funds rate to 4.25 to 4.5 percent. It wasn’t the most surprising move, but markets disagreed with the Fed’s updated forecasts, which called for it to cut interest rates just two more times in 2025, down from four previously.

The revised outlook comes as Fed Chairman Jerome Powell noted that economic conditions are supporting a robust labor market and higher inflation readings, although he tempered expectations by noting some economic uncertainties. Powell compared the situation to driving through fog: “If the path is uncertain, you drive a little slower.”

Lower interest rates will facilitate economic activity by reducing borrowing costs and increasing asset prices. But they could also fuel inflation. Powell acknowledged that there are “inflationary pressures,” especially given that there will be a new administration in 2025.

Wednesday’s decision was nearly unanimous, with Cleveland Fed President Beth Hammack the only dissenter, arguing that inflation made her against the rate cut.

The Federal Reserve’s more cautious outlook is weighing on the market, which hit record highs earlier this year on expectations of sharp interest rate cuts.

This article first appeared on GuruFocus.