GCC Central Banks Slash Interest Rates to Ease Economic Impact of COVID-19

Published March 18th, 2020 - 07:45 GMT
GCC Central Banks Slash Interest Rates to Ease Economic Impact of COVID-19
It also slashed the overnight, the one-month and the CBB lending rate from 1.50 percent to 0.75 percent, 2.20 percent to 1.45 percent and 2.45 percent to 1.70 percent respectively. (Shutterstock)
Highlights
Meanwhile, the UAE central bank trimmed its interest rate on one-week certificates of deposit by 75 bps and other rates by 50 bps.

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

The Saudi Arabian Monetary Authority (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 percent to one percent and the reverse repo rate by 75 bps from 1.25 percent to 0.50 percent,” SAMA said in a statement.

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

Fadl al-Buainain, a financial and banking analyst, told Asharq Al-Awsat that 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, which comes in line with that of the US Fed will contribute to maintaining monetary stability, Buainain said, adding that the link between the SAR and the US dollar requires coordination that protects the SAR and attains 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.

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

“The Central Bank of Kuwait (CBK) is vigilantly monitoring the developments in the global economy and 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 Central Bank of Bahrain (CBB), for its part, also reduced key interest rate applicable to one-week deposit facility from 1.75 percent to one percent.

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


Copyright © Saudi Research and Publishing Co. All rights reserved.

You may also like