Gulf central banks reacted to the U.S. Federal Reserve’s decision to reduce interest rates today as the Fed opted for a quarter point fall in the vote.
Additional rate cuts are likely to be delayed in the immediate term, yet policymakers expect just one more quarter-point reduction in 2026.
Five out of six of the GCC economies’ monetary policies are in sync with the U.S. dollar despite recent attempts to de-peg from the U.S. currency via CBDCs. The UAE’s digital dirham was launched this year. Kuwait is the only GCC state where its currency is tied to a basket of currencies than the U.S. dollar itself.
KSA, the region’s largest economy, lowered its rate by 25% to 4.25% whilst the UAE Central Bank cut its base rate to 3.65%: effective today.
Rate cuts are a monetary injection for GC economies as non-oil growth is prioritised, especially for KSA whose budget is heavily reliant on oil prices.
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