Wednesday, October 30, 2019

Saudi Arabia, Kuwait, Bahrain, UAE, Qatar, Jordan, Hong Kong, Macao cut rates 25 bps

    The eight central banks of Saudi Arabia, Bahrain, Kuwait, Qatar, the United Arab Emirates, Jordan, Hong Kong and Macao lowered their benchmark interest rates by 25 basis points, tracking their U.S. Federal Reserve's similar-sized cut in its federal funds rate.
     The Saudi Arabian Monetary Authority (SAMA) cut its repurchase rate and the reverse repo rate by 25 basis points to 2.25 percent and 1.75 percent, respectively.
     It is the third cut by SAMA this year, mirroring the Fed's three rate cuts in July, September and today.
    The Central Bank of Bahrain (CBB) cut its key policy rate, the one-week deposit facility rate, to 2.25 percent, the overnight deposit rate to 2.0 percent, the one-month deposit rate to 2.60 percent and the lending rate to 4.0 percent.
     It is CBB's second rate cut this year, with the rate being cut in July and today, but not in September.
     Saudi Arabia, Bahrain, UAE, Qatar and Jordan peg their currencies to the U.S. dollar while Kuwait's dinar is linked to a basket of currencies, including the dollar.
     The Central Bank of Kuwait (CBK) lowered its discount rate by 25 basis points to 2.75 percent, its first change in rates since a hike in March 2018. It is the first rate cut since October 2012.
     CBK said the decision fulfills the dual objective of promoting non-inflationary economic growth and ensuring the attractiveness of the national currency.
     "A healthy margin in favor of the KWD against the USD allowed for a discount rate cut that maintains the attractiveness of the national currency," Governor Mohammad Y. Al-Hashel said, adding the lower lending cost should drive credit take-off, motivate demand and support non-oil growth.
    The Qatar Central Bank cut its three main rates by 25 basis points, lowering the benchmark lending rate (QCBLR) to 4.25 percent, the deposit rate (QCBDR) to 2.0 percent and the repurchase rate to 2.0 percent, "taking into account the evolving domestic and international macroeconomic developments."
    The Central Bank of Jordan (CBJ) also cut interest rates on its monetary policy instruments by 25 basis points, saying this was "in response to the recent trends in the interest rates in the regional and international markets, and the positive outcomes witness by the Jordanian balance of payments, particularly national exports, tourism receipts and the continues flow of workers's remittances, which contributed positively to foreign reserves."
    The CBJ's main rate now stands at 4.0 percent, the re-discount rate at 5.0 percent, the overnight deposit window rate at 3.25 percent and the rate on repurchase agreements at 4.75 percent.
    CBJ added the rate cut was also aimed at catalyzing growth of credit and promote domestic spending, both consumption and investment, which should have a positive effect on economic growth.
    CBJ left its rate on its refinancing program that targets small and medium sized projects at 1.75 percent for projects in Amman and for 1.0 percent for projects in other areas.
     This program has provided funds for 1,125 projects at a total investment of 760 million Jordanian dinars, helping create some 11,200 new jobs, CBJ said.
     The Central Bank of United Arab Emirates (CBUAE) also said it would lower the rate on its certificates of deposits and the repurchase rate on short-term borrowing liquidity by 25 basis points in line with the Fed's decision.
     CBUAE's deposit rate is its main instrument for transmitting monetary policy to the banking system and the rate now stands at 2.50 percent.
     The rate cuts by central banks in the Mideast were later followed by the Hong Kong Monetary Authority (HKMA) and the Monetary Authority of Macao (AMCM), both of which lowered their benchmark rates by 25 basis points to 2.0 percent, respectively.
    The Hong Kong dollar is pegged to the U.S. dollar and Macao's pataca is linked to the Hong Kong Dollar.


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