GCC countries follow US rate cut

The UAE, Qatar, Kuwait, Saudi Arabia and Bahrain have all followed the interest rate cut made by the US Federal Reserve in response to major falls in global equities.

The Fed cut interest rates by 75 basis points on 22 January, in its first unscheduled rate decision since September 2001. The move was quickly followed by most of the GCC countries in a move to support their currency pegs to the US dollar.

The UAE central bank cut the repurchase rate by 75 basis points matching US rates of 3.5 per cent. In Qatar, Saudi Arabia and Bahrain the rate was cut by 50 basis points to 3.5 per cent, while Kuwait also cut its rate by 50 basis points to leave it at 4 per cent. 

Saudi Arabia and Bahrain also increased reserve requirements in an attempt to keep inflation in check by forcing banks to keep more money in their vaults.

Kuwait surprised the markets by also cutting the discount rate by 50 basis points to 5.75 per cent. The discount rate, the rate charged to customers on their debt, had been kept high to discourage borrowing.