Gulf Central Banks Cut Interest Rates Following US Federal Reserve Move

Central banks across the Gulf Cooperation Council (GCC) lowered key interest rates by 25 basis points on Wednesday, mirroring the US Federal Reserve’s first rate cut since December. The Fed reduced its benchmark range to 4.0–4.25 percent in response to signs of slowing economic growth in the United States.

The Saudi Central Bank (SAMA) adjusted its repurchase agreement rate to 4.75 percent and the reverse repo to 4.25 percent. In the UAE, the base rate on overnight deposits was reduced from 4.40 percent to 4.15 percent, while Bahrain lowered its overnight deposit rate to 4.75 percent from 5 percent.

With most GCC currencies pegged to the US dollar, policymakers in the region typically align their decisions with moves by the Federal Reserve to maintain currency stability.

Qatar’s central bank cut its deposit rate to 4.35 percent, lending rate to 4.85 percent, and repo rate to 4.60 percent. The Central Bank of Oman also reduced its repo rate for local banks by 25 basis points to 4.75 percent. Meanwhile, the Central Bank of Kuwait lowered its discount rate to 3.75 percent from 4 percent. Jordan’s central bank also followed suit.

Analysts said the coordinated cuts are aimed at stimulating economic activity by lowering financing costs, which could encourage borrowing, investment, and consumer spending.

“Although rate cuts generally reduce returns from traditional investments like fixed deposits, they may encourage gains in the stock market, especially for growth stocks and dividend-paying companies,” said Vijay Valecha, chief investment officer at Century Financial.

He noted that a softer US dollar, which fell below 97 following dovish signals from the Fed, could benefit the UAE’s tourism industry by making travel cheaper for visitors from non-dollar economies. However, he warned that businesses dependent on imports could face higher costs, as weaker dollar trends typically raise import prices.

Repo and discount rates—mechanisms used to manage liquidity and short-term borrowing—reflect the region’s close financial ties with the global economy. By aligning with the Fed, GCC central banks aim to ensure monetary stability while balancing the need to support growth.

The Fed’s move comes against a backdrop of cooling US growth. Recent data showed slower hiring, a modest rise in unemployment, and persistent inflation. In a statement, the Federal Open Market Committee reaffirmed its commitment to returning inflation to its 2 percent target.

“The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals,” the Fed said, noting that future decisions would be based on a broad set of indicators, including labor market trends, inflation, and global financial conditions.