By Yomna Ehab and Muhammad Al Gebaly
CAIRO (Reuters) -Most Gulf central banks cut key interest rates on Wednesday after the U.S. Federal Reserve moved to reduce rates by a quarter of a percentage point, its second rate cut decision this year.
The Fed’s decision to cut rates by 25 basis points drew dissents from two policymakers and Chair Jerome Powell said a further reduction in interest rates in December was far from a foregone conclusion.
The oil and gas exporters of the Gulf Cooperation Council generally follow the Fed’s lead on interest 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 U.S. dollar.
Saudi Arabia, the region’s biggest economy, cut its repurchase agreement (repo) rate by 25 bps to 4.50% and its reverse repo rate also by 25 bps to 4%. The United Arab Emirates’ central bank reduced the base rate applied to its overnight deposit facility to 3.9%, effective Thursday.
Shielded from stubbornly high inflation elsewhere, the Gulf region is expected to benefit from lower interest rates to stimulate economic activity and bolster non-oil growth.
All have embarked on ambitious programmes to diversify domestic economies away from hydrocarbons and develop sectors such as real estate, tourism and manufacturing, which require billions in financing and investment.
The central banks of Qatar, Bahrain and Oman all followed the Fed move and cut key rates by 25 basis points. The Central Bank of Kuwait decided to hold rates steady and said monetary policy was consistent with local economic conditions.
(Writing by Rachna Uppal; Editing by Andrea Ricci)
Comments