By Enas Alashray and Jaidaa Taha
DUBAI (Reuters) -Most central banks of the Gulf Cooperation Council cut key interest rates on Wednesday, following the Federal Reserve’s decision to reduce U.S. rates by a quarter of a percentage point.
The Federal Reserve on Wednesday lowered the federal funds target rate range by 25 basis points (bps) to between 4.25% and 4.5%. It also signalled it will slow the pace at which borrowing costs fall any further given a relatively stable unemployment rate and little recent improvement in inflation.
The Gulf’s oil and gas exporters generally follow the Fed’s lead on 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 dollar.
Saudi Arabia, the region’s biggest economy, cut its repurchase agreement (repo) rate and reverse repo rate by 25 bps each to 5% and 4.5%, respectively.
The United Arab Emirates also reduced its base rate on the overnight deposit facility by a quarter of a percentage point, to 4.40%.
Most regional economies have been largely shielded from stubbornly high inflation elsewhere and have implemented ambitious economic diversification plans to boost non-oil growth.
Oman’s central bank also cut its repo rate by 25 basis points to 5%, the state news agency reported on Wednesday.
In Qatar, the central bank cut its three main interest rates by a slightly deeper 30 bps, while Bahrain’s central bank stuck with a 25 bps reduction in its overnight deposit rate, to 5%.
In a separate statement released on Wednesday, the Central Bank of Kuwait said it “has adopted a gradual and balanced approach in adjusting the discount rate,” noting it had cut its discount rate by 25 basis points to 4% as of Sept. 19.
