# How do interest rate decisions by the Federal Reserve affect people outside the US?

Fed decisions move the dollar and global borrowing costs, which shifts exchange rates, local interest rates and the cost of dollar debt in other countries. The IMF reported that emerging market currencies fell about 4 percent against the dollar in the first half of 2024 as expected Fed cuts faded.

The Federal Reserve sets US short-term interest rates. Because the dollar is used so widely, those decisions travel. The Federal Reserve Board (2025) reports that about 60 percent of foreign currency debt is in dollars.

The first channel is the exchange rate. When US rates look set to stay high, money flows toward dollar assets. The IMF reported in July 2024 that emerging market currencies had fallen about 4 percent against the dollar that year.

The second channel is borrowing costs. A weaker local currency makes dollar debt more expensive to repay. The IMF (January 2024) noted that high borrowing costs were blocking new financing for some frontier and low income economies.

Local central banks often respond. Some raise or hold rates to protect their currency, which affects mortgages and business loans. Currency weakness can also raise prices of imported goods and fuel.

For a household abroad, the effect depends on which currencies you earn, save and spend in. Dollar earners may gain local buying power when the dollar is strong. Local currency borrowers with dollar debts face the opposite.

## Sources

- [Financial Stability Implications of Emerging Market Currency Developments](https://www.imf.org/en/blogs/articles/2024/07/22/financial-stability-implications-of-emerging-market-currency-developments), International Monetary Fund, IMF Blog
- [Emerging Markets Navigate Global Interest Rate Volatility](https://www.imf.org/en/blogs/articles/2024/01/31/emerging-markets-navigate-global-interest-rate-volatility), International Monetary Fund, IMF Blog
- [The International Role of the U.S. Dollar, 2025 Edition](https://www.federalreserve.gov/econres/notes/feds-notes/the-international-role-of-the-u-s-dollar-2025-edition-20250718.html), Board of Governors of the Federal Reserve System, FEDS Notes

Facts checked 2026-10-08. Next review by 2027-04-08. Written and reviewed by Todd Allyn, Sovereo Intelligence Research. Canonical page: https://www.sovereo.com/answers/how-do-federal-reserve-interest-rate-decisions-affect-people-outside-the-us/
Educational research, not legal, tax, immigration or financial advice.