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Gulf central banks cut key interest rates following Fed move

CAIRO: Gulf central banks cut their key interest rates on Wednesday after the Federal Reserve cut U.S. interest rates by 25 basis points for the first time this year.

The Fed cut its rate by a quarter of a percentage point, in a move that won support from most of President Donald Trump's central bank appointees.

The Gulf's oil and gas exporters generally follow the Fed's lead on rate moves as most regional currencies are pegged to the U.S. dollar. Only the Kuwaiti dinar is pegged to a basket of currencies, which includes the U.S. dollar.

While most regional economies have been largely shielded from stubbornly high inflation elsewhere, all have implemented ambitious economic diversification plans to boost non-oil growth and develop sectors such as real estate, tourism and manufacturing, which require billions in financing and investment.

Saudi Arabia, the region's biggest economy, cut its repurchase agreement (repo) rate by 25 bps to 4.75% and its reverse repo rate also by 25 bps to 4.25%.

The United Arab Emirates' central bank also reduced the base rate applied to its overnight deposit facility by 25 bps to 4.15%, from 4.40%, effective Thursday.

"The immediate impact (of a Fed cut) would be lower borrowing costs across public and private sectors, easing pressure on governments, firms, and households and supporting broader fiscal stimulus and investment," said Hamza Dweik, Saxo Bank's head of trading for Middle East and North Africa.

"A softer dollar, often associated with Fed easing, could support oil prices, benefiting GCC exporters. Nevertheless, energy-market volatility remains a key risk, given evolving global demand dynamics," Dweik said.

Qatar's central bank reduced its deposit rate by 25 bps to 4.35%, its lending rate by 25 bps to 4.85% and its repo rate by 25 bps to 4.60%.

Bahrain's central bank also cut its overnight deposit rate by 25 bps to 4.75% from 5%, effective Thursday.

Kuwait cut its discount rate by 25 basis points to 3.75% from 4%.

The Central Bank of Oman cut its repo rate by 25 basis points to 4.75%.

A Reuters poll in July showed ramped-up oil production and diversification efforts will help most Gulf economies grow faster this year than they did in 2024.