Gulf central banks follow US Fed in key rate cuts
- GCC generally mirrors US central bank
- Borrowing costs cut by 25 basis points
- Fed earlier lowered benchmark rate
Central banks across the Gulf Cooperation Council (GCC) countries have cut their key interest rates by a quarter point, following the US Federal Reserve’s move.
The GCC bloc generally mirrors the Fed, given that most regional currencies are pegged to the US dollar. The Kuwaiti dinar is pegged to a basket of currencies, including the dollar.
The Saudi Central Bank cut the repurchase (repo) and reverse repo rates by 25 basis points (bps) each to 4.25 percent and 3.75 percent, it said in a statement.
The Central Bank of the UAE lowered the base rate on its overnight deposit facility to 3.65 percent from 3.90 percent, effective Thursday.
The Central Bank of Kuwait (CBK) reduced the discount rate by 25 bps, to 3.5 percent from 3.75 percent.
“This decision aims to keep pace with developments in the local economy, stimulate economic activity across various sectors, and maintain the financial stability of banking and financial institutions,” the CBK said in a statement.
The Central Bank of Oman decreased its repo rate for local banks to 4.25 percent.
“The rate cut is expected to give a boost to economic activity by reducing financing costs. Consequently, we can expect to see increased investment and consumption levels,” it said in a statement.
The Central Bank of Bahrain cut the overnight deposit rate from 4.50 percent to 4.25 percent, while the Qatar Central Bank lowered its deposit and repo rates by 25 bps to 3.85 percent and 4.10 percent.
Further reading:
- Mena bonds drop as Fed tipped to change tack on rate cuts
- UAE can navigate global volatility, IMF says
- Opinion: Asian FX should be on every Gulf investor’s radar
On Wednesday the US central bank lowered its benchmark rate by a quarter point, its third cut this year.
In his post-meeting news conference, Fed chair Jerome Powell said “the reduction puts the Fed in a comfortable position”.
“We are well positioned to wait and see how the economy evolves,” he added.
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