Wednesday, Dec 17, 2008
By Tahani Karrar and Majdoline Hatoum
OF ZAWYA DOW JONES
DUBAI (Zawya Dow Jones)--Kuwait's central bank Wednesday cut its repurchase rate 50 basis points and Oman slashed the repurchase rate 89 basis points following the U.S. Federal Reserve's Tuesday interest rate cut, while United Arab Emirates, Qatar and Bahrain held steady. Saudi Arabia cut both lending and deposit rates Tuesday.
"Kuwait's Central Bank decision to cut its repurchase rate by 50 basis points to 2.5% aims at supporting the country's economy against challenges created by the global economic meltdown," Kuwait's central bank governor Sheikh Salem Al Sabah said in a statement on Kuwait's national news agency, KUNA.
Al Sabah added the central bank is "ready at this point to employ various monetary means and supervisory measures... to strengthen the basis of the economic and financial national system".
Oman's central bank, which links its rate to LIBOR movements, cut its key repurchase rate 89 basis points to 1.53%, officials at the central bank told Zawya Dow Jones.
The United Arab Emirates, which cut its overnight repurchase rate in October to 1.5%, held steady for the second time in a row, as did Qatar, which opted not to cut interest rates in October when other Gulf countries did. Qatar's current deposit rate is only 2%.
Bahrain, which slashed its repurchase and overnight rate by 125 basis points to 3.5% in October, also did not cut rates after Saudi Arabia's central bank, SAMA, said Tuesday it would cut two key rates ahead of the Federal Reserve meeting to "guarantee the banking system the proper liquidity to meet local credit demand, and in accordance with local and global developments".
SAMA cut the repurchase, or lending, rate and reverse repo rate 50 basis points to 2.5% and 1.5% respectively, the central bank said in a statement carried by the official SPA news agency.
Analysts in the region said the emerging divergence of Gulf monetary policies from Federal Reserve policy is due to the tighter global credit environment.
"Rates are already negative across the GCC, central banks have already injected liquidity so keeping rates a bit higher will maintain deposits and protect their banking systems," said Nasser Saidi, chief economist at the Dubai International Financial Center, or DIFC.
Fabio Scacciavillani, director of Macroeconomics and Statistics at DIFC, added central bankers may also be taking advantage of the impaired ability of speculative funds to obtain credit.
"There's a degree of extra freedom (for Gulf central banks) because the international financial markets are in non-normal states and speculative hot money cannot easily play for short-term arbitrage gain," Scacciavillani said.
-By Tahani Karrar and Majdoline Hatoum, Dow Jones Newswires, +9714 364 4965 Tahani.Karrar@dowjones.com
Copyright (c) 2007 Dow Jones & Company, Inc.
(END) Dow Jones Newswires
17-12-08 1234GMT
