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.
Thursday 19, September 2019 BY KUDAKWASHE MUZORIWA
The Central Bank of the UAE (CBUAE) and the Saudi Arabia Monetary Authority (SAMA), the central banks of the two biggest Gulf Arab economies, have reduced interest rates by a quarter percentage point after the Federal Reserve policymakers lowered their main interest rate for a second time this year saying the move should be sufficient to sustain the US expansion.
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 US Dollar, following the Fed’s decision to decrease the Federal Funds Rate by 25 basis points.
Additionally, the central bank also said that the repo rate applicable to borrowing short-term liquidity from CBUAE against certificates of deposits has also been lowered by 25 basis points.
Similarly, SAMA said that it has reduced the repo rate from 2.75 to 2.50 per cent as well as the reserve repo rate from 2.25 to two per cent in line with the regulator’s objective of preserving monetary stability amid evolving developments in global financial markets.