Most central banks in the Gulf Cooperation Council (GCC) trimmed their interest rates within hours after the US Federal Reserve voted to lower the benchmark rate for the third consecutive time on Wednesday. 

In a widely expected move, the US Federal Open Market Committee voted near unanimously to cut the federal funds rate to a range between 4.25% and 4.50%.

Most GCC central banks usually track the Fed's policy rate moves as their currencies are pegged to the US dollar. Kuwait is the only exception in the six-member economic bloc as its dinar is linked to a basket of currencies.

The Central Bank of the UAE cut its base rate on overnight deposits by 25 basis points (bps) to 4.40% while maintaining the short-term borrowing rate at 50 bps above the base rate.

Saudi Arabia’s SAMA reduced its repo and reverse repo rates by 25 bps each to 5% and 4.50%, respectively.

Qatar's central bank implemented a 30 bps reduction across its deposit, lending, and repo rates, lowering them to 4.60%, 5.10%, and 4.85%, respectively.

The Central Bank of Bahrain cut its overnight deposit rate by 25 bps from 5.25% to 5.00%, effective 19 December 2024. In Oman, the monetary authority cut its repo rate by 25 bps to 5%.

“While monetary policy in the GCC may well end 2025 tighter than we had previously anticipated, by our current projections rates would still be 175bps lower than they were earlier this year. This should be supportive of growth in the regional non-oil economy, and we forecast GCC weighted average non-oil GDP growth of 4.2% in 2025, compared with our projection of 3.8% growth this year,” said Daniel Richards, a senior Middle East and North Africa economist at Dubai-based lender Emirates NBD, in a note.

(Reporting by Brinda Darasha; editing by Anoop Menon)
brinda.darasha@lseg.com