The ripple from Washington traveled swiftly across the Gulf on Wednesday. Hours after the U.S. Federal Reserve trimmed rates by 25 basis points, the region’s central banks moved in unison, pulling their own key rates lower.
For Saudi Arabia, the heavyweight of the bloc, the repo rate slipped to 4.75% and the reverse repo to 4.25%. The UAE quickly followed, lowering its overnight deposit facility to 4.15%, while Qatar, Bahrain, Kuwait, and Oman each matched the Fed’s quarter-point cut with adjustments across their lending and deposit rates.
The choreography is no surprise. With most Gulf currencies tethered to the U.S. dollar—Kuwait’s dinar being the lone exception, pegged to a basket—the Fed’s decisions set the rhythm for monetary policy across the region.
Lower borrowing costs may prove a lifeline for governments and businesses juggling ambitious diversification drives, from mega real estate projects to tourism hubs and industrial expansion. “Cheaper credit filters through every corner of the economy—supporting fiscal spending, investment, and household consumption,” observed one regional strategist.
A softer dollar, the typical side effect of Fed easing, could also firm up oil prices, a welcome cushion for the Gulf’s energy exporters. But as traders keep one eye on global demand uncertainties, the relief is tempered by caution.
Still, with oil production ramping up and diversification projects accelerating, economists expect Gulf economies to grow faster in 2025 than they did last year—momentum now given a further nudge by synchronized rate cuts.
