The central banks of the UAE, Kuwait, Bahrain, and Saudi Arabia cut interest rates on Wednesday in response to the US Federal Reserve’s decision to reduce rates by 25 basis points.
The interest cut includes reduction on borrowing cost for personal loans, auto loans, and home loans.
The GCC countries’ currencies are patterned to the US dollar that’s why they follow the Fed’s monetary policy for interest rates.
The Central Bank of the UAE (CBUAE) will reduce interest rates applied to the release of its Certificates of Deposits from October 31, 2019.
Moreover, the Repo rate that applies to borrowing short-term liquidity from CBUAE against Certificates of Deposits is included in the reduction by 25 basis points.
Certificates of Deposit are the monetary policy instrument through which changes interest rates are transmitted to the banking system in the UAE.
Furthermore, Kuwait reduced discount rate by 25 basis points to 2.75 percent from 3 percent with regards to the major Gulf central banks who follows the Federal Reserve.
The central bank said that the decision aims to “reduce the cost of borrowing in the Kuwaiti dinar, maintain a comfortable margin for the Kuwaiti dinar, and prove a supportive environment for investment.”