The Fed lower interest rates move signals global shifts as the Federal Reserve interest rates cut impacts borrowing costs, inflation, and capital flows. Economists say the latest Fed rate news could ease Pakistan’s debt pressure but may slow export demand amid weaker global growth.
The US Federal Reserve reduced its major interest rate by 0.25 percentage points and pegged it to 3.75 to 4 percent. It is the second interest rate reduction in two months, with the central bank intending to stimulate a declining job market and relax the cost of borrowing in the US.
Fed Rate News: Labour Market Drives Policy
Chair Jerome Powell said the labour market is “less dynamic and somewhat softer.” The Fed lowered interest rates, followed by weaker job growth and a mild inflation reading of 3% in September. Private payroll data from ADP showed the US lost 32,000 jobs last month.
Powell added that a December rate cut is “not a foregone conclusion.” The Federal Reserve’s interest rate move also ends the central bank’s balance sheet reduction from December 1, a policy that had tightened financial conditions since the pandemic.
Global Impact of Fed Lower Interest Rates
As per BNP Paribas Research, a cut in the Fed rate tends to undermine the US dollar and lower the borrowing rates in the world. This helps developing countries such as Pakistan to access financing easy. However, economists cautioned that slower economic growth in the world may restrict the inflows of investors to the developing economies.
Pakistan Economy and Federal Reserve Interest Rates
The Fed rate news affects Pakistan through exchange rates, capital flows, and external borrowing. A weaker dollar can ease Pakistan’s debt servicing costs. Bloomberg reported that the State Bank of Pakistan may consider easing rates further depending on the IMF review and external conditions.
Business Recorder reported that the Fed’s cut could lower imported inflation in Pakistan but slow global demand may hit exports. The mixed effects mean policymakers must balance inflation control and growth.
