UPDATE 1-Kuwait, Gulf central banks cut key rates following Fed

Reuters
Updated

(Adds detail, growth projection)

DUBAI, Oct 30 (Reuters) - Kuwait’s central bank cut its benchmark interest rate on Wednesday, joining the Federal Reserve-led monetary easing cycle with its Gulf peers for the first time since July.

Saudi Arabia, United Arab Emirates and Bahrain, whose currencies are pegged to the U.S. dollar, also cut rates.

Kuwait cut its discount rate by 25 basis points to 2.75% from 3% after staying pat in July and September when other major Gulf central banks followed the Federal Reserve.

Kuwait's currency is pegged against a basket of currencies of its trading partners unlike its Gulf peers.

The decision aims 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 central bank said in a tweet.

The Federal Reserve on Wednesday cut interest rates for the third time this year in a move to ensure the U.S. economy weathers a global trade war without slipping into a recession, but signaled its rate-cut cycle might be at a pause.

Kuwait's latest move came as its economy is facing headwinds from oil production cuts by major OPEC and non-OPEC oil producers,

The International Monetary Fund has projected Kuwait's economy will grow by 0.6% in 2019 and Saudi Arabia's economy to expand just 0.2%, cutting its earlier forecast.

The Saudi Arabian Monetary Authority (SAMA) cut its repo rate, used to lend money to banks, to 225 basis points from 250 bps, and the reverse repo, the rate at which commercial banks deposit money with the central bank, by the same margin to 175 bps.

The United Arab Emirates' central bank also said it was cutting interest rates applied on the issuance of certificates of deposits by 25 basis points, and reduced the repo rate for borrowing short-term liquidity had been cut by 25 basis points.

Bahrain's central bank, which had avoided a rate cut in September, cut all its key rates by 25 basis points.

It cut its one-week deposit facility to 2.25%, its overnight deposit rate to 2%, its one-month deposit rate to 2.6%. It cut its lending rate to 4% from 4.25%. (Reporting By Aziz El Yaakoubi, Asma Alsharif, writing by Nafisa Eltahir; Editing by Chizu Nomiyama)