Gulf central banks cut key interest rates, mirroring Fed move
By Yomna Ehab and Jaidaa Taha
DUBAI/CAIRO, Sept 18 (Reuters) -Most Gulf central banks cut their key interest rates on Wednesday after the Federal Reserve decreased U.S. rates by half a percentage point, citing 'greater confidence' on inflation.
The Fed cut its rate by 50 basis points (bps) on Wednesday with policymakers seeing the benchmark rate falling by another half a percentage point by the end of this year.
The Gulf region's oil and gas exporters tend to follow the Fed's lead on rate moves as most regional currencies are pegged to the U.S. dollar; only the Kuwaiti dinar is pegged to a basket of currencies, which includes the dollar.
But regional economies have been largely shielded from stubbornly high inflation elsewhere, and have implemented ambitious plans to diversify revenue sources and boost non-oil growth.
Saudi Arabia, the region's biggest economy, cut its repurchase agreement (Repo) rate and reverse repo rate by 50 bps each to 5.5% and 5.0% respectively, according to a central bank statement.
The United Arab Emirates' central bank also reduced its base rate on the overnight deposit facility by half a percentage point to 4.90%.
"A Fed rate cut signals a favourable environment for the Gulf’s long-term investment and economic diversification objectives," said Damian Hitchen, CEO of Saxo Bank for the Middle East and North Africa.
"With lower borrowing costs, investments in non-oil sectors, such as tourism, renewable energy, and technology, become more attractive, aligning with the region’s strategic goals to reduce reliance on oil," he added.
Qatar's central bank cut three key rates by 55 bps each, while Bahrain cut the overnight deposit rate by 50 bps. Kuwait reduced its discount rate by a quarter percentage point to 4% from 4.25%.
A Reuters poll in July showed that inflation in the region was expected to average between 1.0% and 3.0% in 2024.
Reporting by Yomna Ehab and Jaidaa Taha in Cairo; Additional reporting and writing by Rachna Uppal;
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
