Bank rate hike only after detailed study

By Staff Reporter — MUSCAT: Dec. 17: Interest rates in Oman will be raised only after a detailed study, reports quoting Hamood bin Sangour al Zadjali, Executive President of Central Bank of Oman (CBO) said on Saturday. It may be noted that Saudi Arabia, Kuwait and Bahrain raised interest rates within minutes of the US Federal Reserve’s decision on Wednesday as they scrambled to avoid downward pressure on their currencies due to low oil prices. Pressure on the currencies has eased in recent months as oil prices have begun to rebound and governments have cut spending to reduce their deficits. But authorities are keen to prevent higher US interest rates from reviving the speculation.
All GCC central banks were expected to raise their own rates in coming days.
After the Fed lifted the federal funds target by a quarter of a percentage point, Saudi Arabia raised its reverse repurchase rate — the rate at which commercial banks deposit money with the central bank — by the same margin to 0.75 per cent.
The Saudi central bank cited “developments in the domestic and international financial markets”; it did not elaborate.
But it also decided to keep its repurchase rate, which it uses to lend money to banks, unchanged at 2.00 per cent — a signal that it is trying to prevent low oil prices from hurting liquidity at banks and pushing up money market rates steeply, which could slow the Saudi economy.
Kuwait’s central bank raised its discount rate, used to determine maximum interest rates on dinar borrowing at local banks, by a quarter of a percentage point to 2.50 per cent.
(With Reuters inputs)