Oman, GCC central banks cut interest rates

MUSCAT: Central banks across the GCC, including the Sultanate of Oman, announced interest rate cuts following a similar move by the US Federal Reserve.
​The Central Bank of Oman (CBO) decreased its repo rate for local banks - effective from Thursday, September 18, 2025 - by 25 basis points (0.25%) to 4.75%.
Announcing the measure, it said: “The Central Bank of Oman's monetary policy aims at maintaining its fixed exchange rate, which is aligned with the structure and nature of the Omani economy. There are a number of advantages for the Sultanate of Oman that are derived from this policy, among which are Stability of the domestic currency, avoidance of irregular capital movements across borders, enhancing investors' confidence in the Omani economy by removing exchange rate risk, and stimulating economic activities by lowering the domestic cost of funding.”
It further added: “On these lines, the rate cut is expected to give a boost to economic activity by reducing financing costs. Consequently, we can expect to see increased investment and consumption levels.”
The Saudi Central Bank (SAMA) said it reduced its repurchase agreement (repo) rate by 25 basis points to 4.75%, and the reverse repo rate by the same amount to 4.25%. The Central Bank of the UAE also announced a 25-basis-point cut to its overnight deposit facility rate, bringing it down to 4.15% from 4.40%, effective Wednesday. The Qatar Central Bank lowered its key rates by 25 basis points as well: The deposit rate was cut to 4.35%, the lending rate to 4.85%, and the repo rate to 4.60%, according to a statement issued on Wednesday. Meanwhile, the Central Bank of Kuwait announced a 25-basis-point reduction in its discount rate to 3.75%, also effective Thursday.
The decision follows the US Federal Reserve’s quarter-point rate cut. The Kuwaiti central bank emphasized that the move aims to maintain monetary and financial stability. In Bahrain, the central bank reduced its overnight deposit rate by 25 basis points to 4.75%, also effective Thursday.
Earlier on Tuesday, the US Federal Reserve cut its key interest rate for the first time this year, citing slower job growth and rising risks to the economy. The Fed lowered its target range by 25 basis points to between 4.00% and 4.25%, and signaled two more cuts could follow later in the year. Stephen Miran, the newest member of the Fed’s Board of Governors, was the lone dissenter, advocating for a larger cut.
Josh Gilbert, Market Analyst at eToro, commented that looking ahead, the Fed has signaled two more cuts are possible in 2025, barring any significant surprises in inflation or employment data. However, the central bank’s projections for 2026 point to just one additional cut — a stark contrast to the market’s expectation for two to three reductions. Historically, rate-cut forecasts can fluctuate considerably over longer horizons and don’t always weigh heavily on equities. Indeed, the past several years have shown that stocks can perform well in a higher-rate environment.
For investors, the Fed’s decision represents a supportive backdrop. With equity markets already at record highs, the risk heading into the meeting was a pushback against 2025 cut expectations. That didn’t materialize, but the absence of a more dovish tone kept market reaction subdued.
While markets may need a pause after strong gains, analysts expect investors to continue “buying the dip” so long as the US economy avoids recession and corporate earnings remain robust. Historically, rate cuts outside of recessionary periods have served as a positive catalyst for equities. Sectors to watch include technology, small caps, housing-related stocks, real estate, gold, and Bitcoin. (With inputs from ONA)