Business | Banking
Bahrain's central bank cuts rate by 0.75%
The Central Bank of Bahrain (CBB) on Thursday cut its key policy interest rate by 75 basis points, after reviewing the interest cut of the US Federal Reserve.
- By Habib Toumi, Bahrain Bureau Chief
- Published: 23:45 December 18, 2008
Manama: The Central Bank of Bahrain (CBB) on Thursday cut its key policy interest rate by 75 basis points, after reviewing the interest cut of the US Federal Reserve.
"Effective immediately, the CBB's rate on the one-week deposit facility is 0.75 per cent down from 1.50 per cent previously," the bank said.
"The CBB's lending standing facilities remain available for its banks at their initiative to assist them to meet their liquidity needs. The CBB has decided to adjust the rate on the overnight deposit facility to 0.25 per cent, from 1 per cent previously," the statement said.
CBB also decided to adjust the repo lending rate through which it charges banks for the use of these facilities.
"The CBB has reduced the repo lending rates to 2.75 per cent from 3.50 per cent previously," the bank said.
Money markets
"The adjustment to the deposit and lending rates represents a continuation of measures taken by the CBB to ensure the smooth functioning of the money markets in Bahrain, and in accordance with the policy of pegging the Bahrain Dinar to the US dollar."
The bank added that it "continues to monitor global and local market developments closely and will consider additional measures to ensure the normal functioning of Bahraini markets should the circumstances require."
Saudi Arabia and Kuwait reduced their benchmark lending rates by 50 basis points this week after the Federal Reserve chopped interest rates to between zero and 0.25 per cent.
Global financial turmoil has put the brakes on a regional oil-fuelled economic boom, and has discouraged private investors from taking loans to participate in public-private expansion projects because of the high cost of funding.
Rate cuts in Saudi Arabia, Kuwait and Bahrain have eased pressure on money markets. Bahrain's three-month interbank rates have fallen almost 70 basis points in the last two months as the Gulf state cut its main lending rates by 250 basis points in total.
Not all Gulf states have reduced rates, however. The UAE Central Bank refrained this week from tracking the Fed for the second time in less than two months. High UAE interbank rates have barely reacted to government and central bank measures to defrost money markets.
Qatar held off reducing rates following two Fed cuts in October.
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