GCC central banks follow US Fed in key rate cuts

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 the only one pegged to a basket of currencies, which includes the dollar.

The Saudi Central Bank (Sama) 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 the statement.

The Central Bank of the UAE also 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 from Thursday.

“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 (CBB) cut the overnight deposit interest rate from 4.50 percent to 4.25 percent, effective Thursday.

The Qatar Central Bank lowered its deposit and repo rates by 25 bps to 3.85 percent and 4.10 percent as of Thursday.

On Wednesday, the US Federal Reserve lowered its benchmark interest rate a quarter point, its third cut this year.

In his post-meeting news conference, Fed chair Jerome Powell said that “the reduction puts the Fed in a comfortable position as far as rates”.

“We are well positioned to wait and see how the economy evolves,” he added.