According to a local media report, the Central Bank of the UAE will reduce  interest rates applied to the issuance of its Certificates of Deposits. This is in accordance with the decrease in interest rates on US dollar. 

The Central Bank of the UAE issues Certificates of Deposit to banks operating in the country. It is the monetary policy instrument used to make changes in interest rates to the UAE banking system.

The Federal Reserve cut interest rates for the third time this year. The move stems from an effort to ensure the US economy pass through the global trade war without entering into a recession. 

Kuwait slashed its discount rate by 25 basis points to 2.75 percent from three percent. That said, other major Gulf banks followed the Federal Reserve, a local media reported. 

Kuwait central bank said in a tweet that the decision is to “reduce the cost of borrowing in the Kuwaiti dinar, maintain a comfortable margin for the Kuwaiti dinar, and prove a supportive environment for investment.”

The Saudi Arabian Monetary Authority slashed its repo rate from 250 basis points to 225 basis points. Repo rate is what is used to lend money to banks. 

The Bahrain central bank has also cut all its key rates by 25 basis points. The bank cut one-week deposit facility to 2.25 percent, overnight deposit rate to two percent, one month deposit rate to 2.6 percent and lending rate to 4 percent from 4.25 percent.

The Federal Reserve rate cut has come at a time when leading Gulf countries such as the Kingdom and the UAE are facing slow growth.

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Kuwait has been working on improving the non- inflationary environment to improve the economy. This is a major step towards it.  The decision to keep the Kuwait discount rate has been made after a long process of reviewing and analysing the financial and economic status in Kuwait as well as economic conditions throughout the world.

The Kuwait Dinar had recently fallen by 0.2 percent against the US Dollars. The government and monetary authority have been taking several measures to avoid any further fall of the currency.

The governor further added that the competitiveness and value of the currency should be maintained and improved, to keep it as a reliable source of domestic savings.

The US Fed had recently reduced interest rates by 25 basis points. It was after a very long duration that the US rates have been reduced. The US rate cut has affected all major currencies as well as national interest rates. Other countries in the Middle East including the United Arab Emirates, Qatar, Bahrain, and Saudi Arabia have reduced their interest rates primarily as a result of the US rate cut. But Kuwait has remained firm on keeping its discount rate unchanged at 3 percent.

The current Kuwait discount rate was adopted in March 2018. The rate has not been changed since then, even though US fed rates have been changed consecutively three times since then.

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