ISLAMABAD (TDI): Majority of Gulf central banks lowered their key interest rates in response to the Federal Reserve’s decision to reduce rates by 50 basis points, citing improved confidence in controlling inflation.
The Fed’s rate reduction is expected to be followed by another half-point cut by the end of the year.
Interest Rate
Gulf nations typically align their monetary policy with the Fed. Notably, only the Kuwaiti dinar is pegged to a basket of currencies that includes the dollar.
Saudi Arabia, the largest economy in the region, reduced its repurchase agreement (Repo) rate and reverse repo rate by 50 basis points, bringing them to 5.5% and 5.0%, respectively.
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Similarly, the United Arab Emirates’ central bank cut its base rate on overnight deposits by half a percentage point to 4.90%.
Qatar’s central bank took a slightly larger step, reducing three key rates by 55 basis points each, while Bahrain cut its overnight deposit rate by 50 basis points.
Kuwait adjusted its discount rate down by a quarter percentage point to 4% from 4.25%.
Damian Hitchen, CEO of Saxo Bank for the Middle East and North Africa, commented, “A Fed rate cut signals a favorable environment for the Gulf’s long-term investment and economic diversification objectives.
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” He emphasized that lower borrowing costs make investments in non-oil sectors—such as tourism, renewable energy, and technology—more attractive, aligning with the region’s strategic goals.
Recent forecasts indicate that inflation in the Gulf region is expected to remain stable, averaging between 1.0% and 3.0% in 2024.
