RIYADH: Saudi Arabia’s central bank lowered its benchmark interest rate to 5 percent, its third cut this year, aligning with the US Federal Reserve’s recent decision to reduce rates by 25 basis points.
The Saudi Central Bank, also known as SAMA, reduced its repurchase agreement rate to 5 percent and the reverse repurchase agreement rate to 4.5 percent, it said in a statement. The move is aimed at maintaining monetary stability amid shifting global economic conditions.
The move aligns with the US Federal Reserve decision, which similarly cut rates by 25 basis points, bringing its target range to 4.25–4.5 percent.
“This decision is in line with SAMA’s mandate of preserving monetary stability in the context of global developments,” SAMA said.
The reduction follows a more aggressive 50-basis-point cut in September and reflects a recalibration of policy as inflationary pressures ease. The move is expected to lower borrowing costs, providing relief after two years of elevated rates designed to curb inflation.
Central banks across the Gulf Cooperation Council, whose currencies are largely pegged to the dollar, mirrored the Fed’s move despite relatively stable inflation levels in the region.
The UAE cut its overnight deposit facility rate by 25 basis points to 4.4 percent, while Oman trimmed its repo rate by the same margin to 5 percent. Qatar opted for a slightly deeper reduction, lowering its three main rates by 30 basis points. Bahrain reduced its overnight deposit rate by 25 basis points to 5 percent.
In a separate statement, the Central Bank of Kuwait announced on Wednesday that it had adopted a “gradual and balanced approach” to monetary policy, reducing its discount rate by 25 basis points to 4 percent, effective Sept. 19.
Over the past two years, the US Federal Reserve has aggressively raised interest rates to combat inflation, significantly tightening monetary policy to stabilize prices.
Although inflation in the US has edged closer to the Fed’s 2 percent target, it remains slightly elevated, leaving consumers burdened by high costs.
The GCC economies, particularly Saudi Arabia, stand to benefit from the recent rate cuts. Lower borrowing costs are expected to bolster the Kingdom’s non-oil sectors, a key pillar of Vision 2030. Industries such as construction, real estate, and services, which have already experienced robust growth, are likely to gain additional momentum.
Moreover, cheaper credit could accelerate investments in infrastructure and technology — two critical components of Saudi Arabia’s economic diversification strategy.
