Bahrain lowers interest rate to boost lending

15 September 2009

Central bank cuts rate by 25 basis points and expands dinar-dollar swap facility

The Central Bank of Bahrain (CBB) has cut the base rate by 25 basis points to 0.5 per cent as part of the regulator’s efforts to boost liquidity in the banking market.

The cut effects the rate on one-week deposits with the bank.

The bank also cut the overnight repurchase rate and lending rate to 2.25 per cent.

In addition to these measures, the CBB has expanded a dinar-dollar swap facility, that allows banks to place dinars with the central bank in exchange for dollars.

The CBB previously only allowed the banks to swap currencies for one week. Now they can swap currencies for one month.

According to the central bank, the measures were intended to “ensure the smooth functioning of the money markets in Bahrain”.

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