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Dubai: Gulf countries on Thursday dropped interest rates in a move likely to fuel a near record inflation.
The Central Bank of the UAE lowered the interest rate on its repurchase of Central Bank CDs from 3.5 per cent to 3 per cent, WAM reported.
The bank said in a statement that the new cut was in line with the new level of interest rate on US Dollar Federal Funds, which has cut its benchmark five times since September 18.
"These countries are doing the bare minimum to try to sanitise money supply and signal to the market that they want no speculation on the currencies," said John Sfakianakis, an economist.
Saudi Arabia lowered its reverse repurchase rate by 50 basis points to 3 per cent.
After an emergency Fed cut of 75 basis points last week, Bahrain raised bank reserve requirements to force lenders to keep more money in their vaults.
Kuwait, the only Gulf oil producer not pegged to the dollar, lowered its repurchase rates by 50 basis points to 3.5 per cent but left its benchmark discount rate unchanged at 5.75 per cent.
Qatar dropped its deposit-facility rate by 50 basis points to 3 per cent but left its benchmark lending rate unchanged at 5.5 per cent.
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