Gulf Central Banks Cut Interest Rates to Reduce Coronavirus Impact

Gulf Central Banks Cut Interest Rates to Reduce Coronavirus Impact

Gulf central banks cut interest rates on Monday. This comes a day after the US Federal Reserve slashed its rates to near zero to ease the impact of the coronavirus outbreak.

The SAMA cut repo rate (at which the central bank lend to banks) and reverse repo rate (at which the central bank of a country borrows money from commercial banks) by 75 basis points (bps).

“In light of global developments, SAMA has decided to cut the repo rate by 75 bps from 1.75% to 1% and the reverse repo rate by 75 bps from 1.25% to 0.50%,” SAMA said in a statement.

“The reduction in repo rates is for preserving monetary stability given evolving global developments,” it explained.

The Kingdom’s monetary policy is linked to that of the Federal Reserve; with a slight difference to achieve the local monetary need.

He added that the link between the two policies deems it necessary for the local monetary decision-maker to keep pace with the changes in the dollar interest rate.

SAMA’s recent decision coinciding the US Fed will contribute to maintaining monetary stability, Buainain said. He also added that the link between SAR and US dollar requires coordination to protect SAR and attain its stability.

Meanwhile, the UAE central bank trimmed its interest rate on one-week certificates of deposit by 75 bps and other rates by 50 bps.

Kuwait cuts its deposit rate

While Kuwait’s central bank cuts its deposit rate by 100 bps to 1.5%, its lowest ever. It also cut its overnight, one-week and one-month repo rates by 100 bps to 1%, 1.25%, and 1.75% respectively.

“The CBK is vigilantly monitoring the developments in the global economy. Besides, their impact on local markets and the banking sector,” said CBK Governor Dr. Mohammad al-Hashel.

He stressed that the central bank will not hesitate to take the necessary decisions to ensure monetary and financial stability.

The CBB, for its part, also reduced key interest rate applicable to one-week deposit facility from 1.75% to 1%.

It also slashed the overnight, the one-month and the CBB lending rate from 1.50% to 0.75%, 2.20% to 1.45% and 2.45% to 1.70% respectively.