GCC central banks hold interest rates steady for 3rd time following Fed's move

09/05/2025 01:30 AST

Gulf Cooperation Council central banks have kept interest rates steady for the third consecutive period, mirroring the US Federal Reserve's decision to hold its benchmark rate between 4.25 percent and 4.5 percent.

As most currencies in the region are pegged to the US dollar, monetary policy follows the decisions taken in Washington, with policymakers opting to lock the rate at the level it has been since December.

The freeze comes amid global uncertainty caused by the ongoing trade war, a slowing of economic growth in the US, and unstable inflation trends, according to a statement by the Federal Reserve.

The country's gross domestic product fell 0.3 percent in the first quarter as a result of slower consumer and government spending and a surge in imports ahead of the tariffs.

The newly released Fed statement said: "In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks."

This decision implies that the Saudi Central Bank, also known as SAMA, will maintain its repo rates at the current level of 5 percent.

The UAE central bank also announced that it has decided to maintain the base rate applicable to the Overnight Deposit Facility at 4.40 percent.

Qatar, Kuwait, and Oman, as well as Bahrain, also mirrored the Fed's move.

Repo rates, which represent a form of short-term borrowing primarily involving government securities, underscore the close economic ties and financial dynamics between the GCC countries and the global economic landscape, particularly the US.

"In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals," the Federal Reserve's statement said.

It added: "The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments."

In April, Fitch Ratings said in a report that Gulf banks face minimal direct impact from new US tariffs but remain exposed to broader risks stemming from weaker oil prices and slowing global growth.

The agency noted at the time that most GCC exports to the US are hydrocarbons, which are exempt from the latest tariffs. Non-oil exports, such as aluminum and steel, which are subject to 10 percent or 25 percent duties, account for only a small share of the trade basket, limiting direct exposure for regional economies and their banking sectors.

Arab News