Gulf will follow Fed rate cut
GCC central banks are poised to cut interest rates after the United States slashed its by 75 basis points in an emergency move on Tuesday, but they may leave lending rates on hold to avoid stoking inflation, analysts said.
Saudi Arabia and four other Gulf oil producers that peg their currencies to the dollar are forced to track US monetary policy to ensure investors do not make higher returns in their currencies than they would get in US deposits, Reuters reported.
“The Gulf will have to match the Fed cut,” said Marios Maratheftis, regional head of research at Standard Chartered Bank. “This is going to create more liquidity, which means more inflationary pressures.”
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