Central banks in the Gulf Cooperation Council (GCC) slashed interest rates by 25 basis points following the US Federal Reserve’s announcement of its second interest rate cut this year. This was done as inflation cooled and remained just above the target of 2% annually.
The US Federal Reserve reduced the federal funds rate from its current range of 4.5% to 4.75%.
The Gulf states typically follow the Fed’s lead when it comes to rate changes because the majority of regional currencies are based on the US dollar.
“Lower rates in the GCC could fuel growth in sectors sensitive to credit conditions, such as real estate and domestic spending, enhancing resilience in the broader economy,” Vijay Valecha, Chief Investment Officer at Century Financial said.
The reverse repo rate and the repurchase agreement (Repo) rate were both lowered by 25 basis points (bps) to 4.75% and 5.25%, respectively, by the Saudi Central Bank (SAMA).
Recently, the Central Bank of the United Arab Emirates (CBUAE) decided to lower the base rate for the Overnight Deposit Facility (ODF) by 25 basis points, from 4.90% to 4.65%.
The CBUAE has also determined that, for all standing credit facilities, the interest rate that applies to borrowing short-term liquidity from the CBUAE will remain 50 basis points higher than the Base Rate.
The overnight deposit rate will be lowered by 25 basis points from 5.50% to 5.25% starting on November 10, according to the Central Bank of Bahrain (CBB).
The current interest rates for the QCB deposit rate, QCB lending rate, and QCB repo rate will be lowered by the Qatar Central Bank (QCB). Thirty basis points were taken off the deposit rate to 4.90%, the QCB lending rate to 5.40%, and the QCB repo rate to 5.15%.
To strike a balance between maintaining economic growth and controlling inflation, the Fed may take a cautious approach to future cuts.