GCC Central Banks Reduce Interest Rates: Implications for Investment Opportunities in Oman
Central Banks in GCC, Including Oman, Announce Interest Rate Cuts
MUSCAT: Central banks throughout the GCC, including the Sultanate of Oman, have announced interest rate reductions in response to a similar action by the US Federal Reserve.
Effective Thursday, September 18, 2025, the Central Bank of Oman (CBO) has lowered its repo rate for local banks by 25 basis points (0.25%) to 4.75%. In its announcement, the CBO stated, “The Central Bank of Oman’s monetary policy aims to maintain its fixed exchange rate, which aligns with the structure and nature of the Omani economy. This policy offers numerous advantages for Oman, including the stability of the domestic currency, prevention of irregular capital movements, increased investor confidence by eliminating exchange rate risks, and stimulation of economic activities through lower domestic funding costs.”
The CBO predicts that the rate cut will bolster economic activity by reducing financing expenses, leading to heightened levels of investment and consumption.
The Saudi Central Bank (SAMA) also announced a reduction of 25 basis points, bringing its repurchase agreement (repo) rate down to 4.75%, while the reverse repo rate was lowered to 4.25%. The Central Bank of the UAE similarly cut its overnight deposit facility rate by 25 basis points, lowering it from 4.40% to 4.15%, effective Wednesday. In Qatar, the central bank has reduced its key rates by 25 basis points, with the deposit rate now at 4.35%, the lending rate at 4.85%, and the repo rate at 4.60%. Furthermore, the Central Bank of Kuwait announced a 25-basis-point reduction in its discount rate to 3.75%, also effective Thursday.
These moves follow the US Federal Reserve’s quarter-point reduction. The Kuwaiti central bank emphasized that its decision aims to sustain monetary and financial stability. Bahrain’s central bank also cut its overnight deposit rate by 25 basis points to 4.75%, effective Thursday.
Earlier this week, the US Federal Reserve implemented its first key interest rate cut of the year, citing sluggish job growth and increasing economic risks. The Fed reduced its target range by 25 basis points to between 4.00% and 4.25%, indicating that two more cuts may occur later this year. Notably, Stephen Miran, the newest member of the Fed’s Board of Governors, was the only dissenting voice, advocating for a more significant reduction.
Josh Gilbert, a market analyst at eToro, noted that the Fed’s signal of potential further cuts in 2025 depends on inflation and employment data. However, projections for 2026 suggest only one additional cut, contrasting with market expectations for two or three reductions. Historically, forecasts for rate cuts can vary significantly over time and do not always impact equities strongly. Recent years demonstrate that stocks can thrive even in higher-rate environments.
For investors, the Fed’s decision creates a supportive backdrop. With equity markets at record highs, the risk before the meeting was a potential rejection of 2025 cut expectations, which did not materialize. However, the lack of a dovish tone kept market responses muted.
While markets may require a breather after recent strong gains, analysts anticipate that investors will continue to engage in “buying the dip” as long as the US economy avoids recession and corporate earnings remain strong. Historically, rate cuts made outside of recession periods have acted as positive catalysts for equities. Key sectors to monitor include technology, small-cap stocks, housing-related industries, real estate, gold, and Bitcoin. (With inputs from ONA)
Special Analysis by Omanet | Navigate Oman’s Market
The recent interest rate cut by the Central Bank of Oman presents significant opportunities for businesses by lowering financing costs, encouraging increased consumption and investment. However, it also introduces a potential risk of over-leveraging as businesses react to the favorable conditions. Smart investors should focus on sectors poised for growth, such as technology and real estate, while remaining cautious of market volatility stemming from global economic uncertainties.
