Kuwait, which pegs its currency to a basket of currencies dominated by the dollar, also cut its discount rate by 25 basis points to 4.25 per cent.

On 29 October the Fed cut interest rates by 50 basis points to 1 per cent to help stimulate the US economy.

Other Gulf countries are expected to quickly follow suit due to their currency pegs to the dollar.

Saudi Arabia has already cut its repurchase rate from 5 per cent to 4 per cent in a bid to stimulate interbank lending.