MercoPress. South Atlantic News Agency

Fed rate drop saves Uruguay 90 Million

The US Federal Reserve sixth consecutive rate cut saved Uruguay 9 million US dollars that added to the five previous successive reductions total almost 90 million US dollars savings. The latest cut in early July, a quarter of a point, means the basic Fed rate now stands at 3,75% the lowest in the seven years, and 2,75% below the 6,5% rate of the last 2000 quarter. However Uruguayan Central Bank officials cautioned that future Fed rate reductions would not necessarily have the same impact since Uruguay still has a significant percentage of its foreign debt at fixed rates. But Uruguayan banking officials were also encouraged by the fact that the Federal Reserve believes that inflation is no longer the US economy's main fear, but rather that "risks are more inclined towards conditions that could generate economic weakness in the future". Meaning credit could become cheaper still, if economic indicators confirm that the US economy is slowing faster than expected (just 1,3% in the first 2001 quarter), besides the fact that Germany is also cooling with a projected 2001 miserable growth of 1,2%.<