Muscat: The Central Bank of Oman (CBO) on Thursday increased the interest rate on repurchases operations of local banks by 25 basis, to become 5.25 per cent, the same increase approved by the US Federal Reserve.
In an online statement, the CBO's monetary policy target aims to sustain and maintain its fixed exchange rate. This policy is aligned with the structure and nature of the Omani economy. There are a number of advantages for the Sultanate that are derived from this policy, which includes the following: the stability of the Omani Rial, mitigation of the capital outflow, promoting certainty among investors by removing exchange rate fluctuation.
The Central Bank of Oman urges licensed banks not to increase the cost of lending to consumers given the abundance of liquidity in the banking system.
“The global economy is witnessing rising and sustained inflationary pressure and as such, central banks in a number of countries are attempting to address this pressure by hiking their respective key policy rates with the objective of reducing lending, and by default reducing aggregate demand that in turn would reduce consumption rates. While higher interest rates are expected to lead to lower inflation, they could result in higher savings", CBO said.
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