Gulf central banks mirror US Federal Reserve rate cut

Gulf central banks lowered their key interest rates after the US Federal Reserve cut its benchmark rate by 50 basis points (bps) on Wednesday.

The Central Bank of the UAE reduced the base rate on its overnight deposit facility by 50 bps from 5.40 to 4.90 percent, effective Thursday.

Saudi Arabia mirrored the US move, cutting repurchase agreement (repo) and reverse repo rates each by 50 bps to 5.5 percent and 5 percent, respectively.

Bahrain lowered its overnight deposit rate by 50 bps to 5.5 percent.

Qatar, however, reduced its repo, lending and deposit rate by 55 bps to 5.45 percent, 5.7 percent and 5.2 percent, respectively. 

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Other GCC state currencies are pegged to the US dollar.

Kuwait, whose dinar is pegged to a basket of currencies, including the US dollar, opted for a smaller cut, reducing its discount rate by 25 bps to 4 percent.

The Fed rate cut, approved with an 11-to-1 vote and the first in more than four years, brings the benchmark federal-funds rate to a range between 4.75 percent and 5 percent.

A Fed rate cut signals a “favourable environment for the Gulf’s long-term investment and economic diversification objectives”, Reuters reported, citing Damian Hitchen, CEO of Saxo Bank for the Middle East and North Africa.