Central Bank of the UAE/Supplied
Analysts expect rate cuts to hurt the margins of Saudi banks, which made record profits of around SAR 50 billion ($13.3 billion) in 2018 following several interest hikes over the past few years.
Sunday 04, August 2019 BY KUDAKWASHE MUZORIWA
The Saudi Arabia Monetary Authority (SAMA), the Central Bank of the UAE (CBUAE) and the Central Bank of Bahrain (CBB) announced that they have cut key interest rates to preserve monetary stability after the Federal Reserve lowered US interest rates for the first time in over a decade.
Unlike other Gulf central banks, the Central Bank Kuwait (CBK) kept its key policy rate unchanged. The Kuwaiti dinar is pegged to an undisclosed weighted basket of international currencies of its major trading and financial partners.
SAMA stated that it has decided to lower its repo rate from 300 basis points to 275 basis points, and its reverse repo rate from 250 basis points to 225 basis points with immediate effect.
Additionally, the CBUAE stated that it will lower interest rates applied to the issuance of its Certificates of Deposits in line with the decrease in interest rates on the US Dollar.
The Saudi riyal and the UAE’s dirham are pegged to the US dollar and the central banks in the respective countries follow the US Federal Reserve on interest rate moves.
Similarly, the CBB stated that it will cut its key policy interest rate on the one-week deposit facility from 2.75 per cent to 2.50 per cent, overnight deposit rate from 2.50 per cent to 2.25 per cent as well as the one-month deposit rate from 3.10 per cent to 2.85 per cent and the lending rate from 4.50 per cent to 4.25 per cent.