Most Gulf central banks follow Fed lead and cut key interest rates

Vijay Valecha, Reuters, November 8, 2024

CAIRO/DUBAI, Nov 7 (Reuters) - Most central banks of the Gulf Cooperation Council (GCC) cut key interest rates on Thursday, following the Federal Reserve's decision to reduce U.S. rates by a quarter of a percentage point.
The Fed cut interest rates by 25 basis points as policymakers took note of a job market that has "generally eased" while inflation continues to move towards its 2% target.
The Gulf's oil and gas exporters generally follow the Fed's lead on rate moves as most regional currencies are pegged to the U.S. dollar; only the Kuwaiti dinar is pegged to a basket of currencies, which includes the dollar.

"Lower rates in the GCC could fuel growth in sectors sensitive to credit conditions, such as real estate and domestic spending, enhancing resilience in the broader economy," Vijay Valecha Vijay Valecha, chief investment officer at Century Financial, said.

Saudi Arabia, the region's biggest economy, cut its repurchase agreement (Repo) rate and reverse repo rate by 25 bps each to 5.25% and 4.75% respectively and the United Arab Emirates also reduced its base rate on the overnight deposit facility by a quarter of a percentage point to 4.65%. Most regional economies have been largely shielded from stubbornly high inflation elsewhere, and have implemented ambitious plans to diversify revenue sources and boost non-oil growth.
In Qatar, the central bank opted to cut its three main interest rates by a slightly deeper 30 bps, while Bahrain's central bank stuck with a 25 bps reduction in its overnight deposit rate.
Growth among the GCC's biggest economies is expected to accelerate next year amid higher oil output, according to a recent Reuters poll, while inflation is projected to remain subdued this year and next with median forecasts ranging from 0.8% to 3.0%.

Dubai's main share index (.DFMGI), opens new tab gained 0.6%, led by a 4% jump in Emirates Central Cooling Systems Corp (Empower) (EMPOWER.DU), opens new tab, which saw an increase in revenue despite reporting a fall in quarterly profit.
However, Dubai Taxi Company (DTC.DU), opens new tab, the largest taxi operator in the Gulf city state by market share, declined 4.1% following a slide in quarterly profit.

In Abu Dhabi, the index (.FTFADGI), opens new tab reversed early losses to close 0.4% higher, helped by a 0.6% increase in conglomerate International Holding Co (IHC) (IHC.AD), opens new tab.
IHC - Abu Dhabi's most valuable company - reported a third-quarter net profit of 5.69 billion dirhams ($1.55 billion), up from 4.83 billion dirhams a year ago.
In addition, according to Valecha, Trump is more likely to resolve regional conflict faster as compared to his counterpart, which is expected to promote further stability in the region.

Source

Reuters