Dubai: Central banks across the Gulf countries slashed interest rates on Monday following the rate cuts announced by the US Federal Reserve late on Sunday.
In an emergency action to support the economy during the coronavirus pandemic, the Federal Reserve on Sunday announced it would cut its target interest rate near zero.
The swifter-than-expected rate cut is designed to prevent the kind of credit crunch and financial market disruptions that occurred during the global financial crisis.
GCC central banks in general track the US interest rates as, all except Kuwait have their currencies pegged to the dollar. Although Kuwaiti dinar is pegged to a basket of currencies, dollar dominates the currency basket with about 80 per cent weightage.
The UAE central bank trimmed its interest rate on one-week certificates of deposit by 75 basis points and decided to maintain the repo rate, applicable to borrowing short-term liquidity from CBUAE against CDs at 50 basis points above the 1-week CD rate, the central bank said in a statement.
The Saudi Arabian Monetary Authority cut repo and reverse repo rates by 75 bps. While Kuwait’s central bank cut its deposit rate by 100 bps (1 per cent) to 1.5 per cent, its lowest ever, it also cut its overnight, one-week and one-month repo rates by 100 bps to 1 per cent, 1.25 per cent, and 1.75 per cent respectively.
The Central Bank of Qatar regulator slashed its deposits, lending, and repo rates. Bahrain’s central bank cut overnight, weekly and monthly deposit rates, in addition to its lending rate.
The latest round of interest rate cuts follow stimulus packages launched by the Saudi, Qatari and UAE central banks over the past few days.
While the UAE Central Bank announced Dh100 billion worth of stimulus, Saudi Arabia announced a 50 billion riyal economic stimulus package.
