Central banks face new credibility test over rate cuts

Central banks are being urged to be cautious with rate cuts due to the risk of inflating expectations that could keep inflation higher than desired. The Tashkent Monetary Policy Dialogue highlighted Uzbekistan's experience, where lower inflation and reduced dollarisation demonstrate the importance of credibility in shaping effective monetary policy. This serves as a reminder that policymakers must balance economic recovery with maintaining trust in their ability to control inflation, as premature cuts could undermine that trust and have long-term economic repercussions.