In a significant move, the United States Federal Reserve announced a 50 basis point cut to its benchmark interest rate, lowering it to a range of 4.75% to 5%.
This marked the Fed’s first rate reduction after a prolonged series of hikes aimed at curbing inflation. Following this, central banks across the Gulf region, including the UAE, Saudi Arabia, Qatar, and Bahrain, quickly followed suit, cutting their interest rates to align with global market shifts.
Gulf Central Banks Adjust to Federal Reserve Rate Cut
The UAE Central Bank (CBUAE) announced a 50 basis point reduction to its Overnight Deposit Facility (ODF) rate, now standing at 4%. Similarly, Saudi Arabia’s Central Bank reduced its repo and reverse repo rates by 50 basis points to 5%, aiming to support economic growth in response to the Fed’s decision.
Qatar’s Central Bank also reduced its key rates, with a 55 basis point cut that brought the lending rate to 5.70%, deposit rate to 5.20%, and repo rate to 5.45%.
Bahrain’s Central Bank lowered its overnight deposit rate from 6.00% to 5.50%, marking a strategic response to maintain financial stability.
Analysts suggest that the Federal Reserve rate cut and subsequent Gulf Central Bank’s interest rate adjustment aim to sustain economic growth while alleviating inflationary pressures.
With inflation rates steadily declining in some Gulf states, such as Kuwait, the rate cuts are expected to further stimulate economic activities by reducing borrowing costs for businesses and consumers alike.
Future Outlook for the Gulf Region
As the impact of rate cuts in the Gulf region unfolds, experts predict further reductions in the near future. The Federal Reserve has hinted at additional cuts through 2025, a move that will likely prompt continued adjustments by Gulf central banks.
This alignment with US monetary policy is critical for maintaining competitive financial conditions within the region.
