The Federal Reserve System (FRS) of the USA decided to lower the interest rate by 25 basis points to a range of 4.25−4.5% per annum during its meeting on December 17−18, as reported by the regulator's press service.
This marks the third consecutive decrease since September. Prior to this, the rate had been maintained at its highest level since 2001, between 5.25−5.5%, for over a year.
The rate reduction is part of a strategy to ease monetary policy. FRS Chair Jerome Powell noted that the current policy is less restrictive, allowing for more cautious actions. However, any further rate cuts will depend on progress in reducing inflation to the target level of 2%.
Economists expect that in January, the American FRS will pause its rate cuts due to ongoing risks of higher inflation.
In September, the FRS lowered the rate by 50 basis points to 4.75−5% per annum. In November, the rate was reduced by 25 basis points to 4.5−4.75%.
What does this mean for me?
Since Uzbekistan's economy is actively linked to the dollar (through exports, imports, and international loans), the FRS's rate cut may:
- make dollar borrowings cheaper for Uzbekistan;
- impact exchange rate policies and the cost of servicing external debt;
- attract investors to emerging markets, including Uzbekistan, due to higher yields compared to declining rates in the USA.
Previously, Spot reported that the Central Bank indicated the possibility of a new increase in the key rate.