Most central banks in the Gulf region cut their benchmark interest rates on Thursday, joining the US Federal Reserve in reducing the rate for the first time in four years.
After hitting the pause on increasing interest rates since July last year, the Fed cut US interest rates by 50 basis points to the 4.75 per cent to 5 per cent range on Wednesday, at the end of its two-day Federal Open Market Committee (FOMC) meeting.
With the much-anticipated cut in the benchmark interest rates, the US has entered a monetary policy easing cycle as the Fed tries to stave off a recession and achieve a soft landing for the world’s biggest economy. The Fed kept the rates at the highest level in 23 years for more than a year to combat inflation, but the move also cooled economic growth.
“Over the past two years, the labour market has cooled from its formerly overheated state. Inflation is eased substantially,” Fed chairman Jerome Powell said on Wednesday. “This recalibration of our policies will help maintain the strength of the labour market.” It would also help further progress on inflation as the Fed begins to move towards a more neutral stance, he added.
- The Saudi Central Bank, better known as Sama, on Thursday matched the Fed rate cut, reducing its repurchase agreement (repo) rate by half a percentage point to 5.5 per cent and its reverse repo rate by a similar margin to 5 per cent.
- The UAE Central Bank reduced its base rate for the overnight deposit facility by 50 basis points to 4.90 per cent, effective from Thursday. It maintained the interest rate applicable to borrowing short-term liquidity from the regulator at 50 basis points above the base rate for all standing credit facilities, the regulator said on Wednesday. The base rate, which is anchored to the Fed's interest on reserve balances (IORB), signals the general stance of the Central Bank's monetary policy and provides an effective interest rate floor for overnight money market rates.
- The Central Bank of Bahrain cut its key rate on overnight deposits by 50 basis points point to 5.5 per cent.
- The banking regulator in Kuwait also dropped its key policy rate, the discount rate, by 25 bps to 4 per cent.
- The Central Bank of Qatar raised its repo rate by a 55 basis points to 5.45 per cent. It also reduced its deposit rate to 5.2 per cent, and the lending rate to 5.7 per cent.
Most central banks in the Gulf follow the Fed's policy rate moves due to their currencies being pegged to the US dollar, with Kuwait the only exception in the six-member economic bloc as its dinar is linked to a basket of currencies. They remained in lockstep with the Fed in its aggressive rate increase cycle despite far lower inflation in the oil-rich economies.
The Fed's bigger cut shows that it is keen to urgently tackle concerns about economic growth.
“The choice to reduce rates by 50 basis points – as opposed to a more tentative 25 bps cut – shows the FOMC are taking an aggressive approach to stimulating growth and propping up the jobs market,” said Mahmoud Alkudsi, senior market analyst at Abu Dhabi-based international securities brokerage ADSS.
“While interest rate cuts were largely priced in by markets, cuts of this extent come as somewhat of a surprise. The lower central rates will likely dampen an already sluggish US dollar in the short term.”
Oil prices, rather than monetary policy, drive spending policies of sovereigns in the region that is home to one third of the world's proven reserves. Countries including Saudi Arabia, the world's biggest oil exporter, and the UAE, the second-largest Arab economy, are undertaking tens of billions of dollars worth of projects to diversify their economies.
Most are part financed by government equity as well as commercial financing facilities and project bonds, and the lower cost will be a welcome relief.
Economic impact
The lower interest rate regime will likely spur economic momentum in the Gulf economies that have maintained strong growth since the pandemic despite global headwinds and geopolitical turmoil, analysts said.
Emirates NBD, the biggest bank in Dubai, said it is “leaving its growth targets unchanged” at this time, given the anticipated benefits for the Gulf region in the wake of the monetary easing-driven assistance to regional economies.
The UAE economy, which has maintained a strong growth streak since 2022, grew by 3.4 per cent in the first quarter of this year. The country’s real gross domestic product reached Dh430 billion ($117 billion) during the January to March period, the Ministry of Economy said earlier this month, citing preliminary estimates from the Federal Competitiveness and Statistics Centre.
A 4 per cent year-on-year rise during the quarter in the non-oil sector of the Arab world's second-largest economy drove growth as the Emirates continued its economic diversification strategy.
Business activity in the UAE's non-oil private sector also maintained growth momentum in August. The seasonally adjusted S&P Global purchasing managers’ index reading increased to 54.2 in August, from 53.7 in July, well above the neutral 50 mark that separates economic growth from contraction.
The UAE's economy rose by 3.6 per cent last year, driven by a 6.2 per cent boost from the non-oil sector. It is projected to grow by 3.9 per cent this year and accelerate to 6.2 per cent expansion next year, with oil production forecast to increase significantly as Opec eases cuts, while the non-oil sector continues to grow, the Central Bank said.
“With the interest rates down, we might see an increase in credit growth, which will be positive for banks and rate sensitive sectors,” Faisal Hasan, chief investment officer and head of asset management at Al Mal Capital, said. “Also, from the investment point of view, dividend yielding asset will catch investor attention.”
The inflation dynamic
The UAE Central Bank projects inflation in the country to rise to 2.3 per cent, compared to 1.6 per cent last year, due to a moderate increase in commodity prices, wages and rents. It also expects consumer prices to average a 2.3 per cent rise next year.
Inflation in Saudi Arabia has also remained relatively low over the past two years. Annual inflation is projected to fall to 1.9 per cent by the end of this year, compared with 2.3 per cent last year, S&P Global Ratings said earlier this month.
“Lower interest rates will be a tailwind to non-oil economies across the region where many have a much lower inflation profile than the US,” Edward Bell, head of market economics at Emirates NBD, said.
Global inflation is forecast to decline steadily, to 5.9 per cent in 2024 and 4.5 per cent in 2025, after hitting 6.8 per cent last year, according to estimates by the International Monetary Fund.
Inflation in the US has come down to 2.4 per cent in August, close to the 2 per cent desired level of the Fed, which had started the rates increase cycle in March 2022 to combat prices that hit a four-decade high of 9.1 per cent in June 2022.
The high interest rate environment aimed at cooling both inflation and job growth has stoked fears of a recession. JP Morgan Chase, the biggest US lender, in August, raised the probability of a US and global recession materialising before end-2024 to 35 per cent. It kept the probability of a recession happening by the end of next year unchanged at 45 per cent.
UAE currency: the story behind the money in your pockets
Zayed Sustainability Prize
MORE ON INTERNATIONAL JUSTICE
Schedule:
Pakistan v Sri Lanka:
28 Sep-2 Oct, 1st Test, Abu Dhabi
6-10 Oct, 2nd Test (day-night), Dubai
13 Oct, 1st ODI, Dubai
16 Oct, 2nd ODI, Abu Dhabi
18 Oct, 3rd ODI, Abu Dhabi
20 Oct, 4th ODI, Sharjah
23 Oct, 5th ODI, Sharjah
26 Oct, 1st T20I, Abu Dhabi
27 Oct, 2nd T20I, Abu Dhabi
29 Oct, 3rd T20I, Lahore
KILLING OF QASSEM SULEIMANI
More from Neighbourhood Watch:
Racecard
%3Cp%3E5pm%3A%20Al%20Bateen%20%E2%80%93%20Maiden%20(PA)%20Dh80%2C000%20(Turf)%202%2C200m%3Cbr%3E5.30pm%3A%20Al%20Khaleej%20%E2%80%93%20Maiden%20(PA)%20Dh80%2C000%20(T)%201%2C400m%3Cbr%3E6pm%3A%20Wathba%20Stallions%20Cup%20%E2%80%93%20Handicap%20(PA)%20Dh70%2C000%20(T)%201%2C400m%3Cbr%3E6.30pm%3A%20Al%20Nahyan%20%E2%80%93%20Handicap%20(PA)%20Dh80%2C000%20(T)%201%2C600m%3Cbr%3E7pm%3A%20Al%20Karamah%20%E2%80%93%20Handicap%20(PA)%20Dh80%2C000%20(T)%201%2C600m%3Cbr%3E7.30pm%3A%20Al%20Salam%20%E2%80%93%20Handicap%20(TB)%20Dh80%2C000%20(T)%201%2C400m%3C%2Fp%3E%0A
UAE currency: the story behind the money in your pockets
The years Ramadan fell in May
More on animal trafficking
Zayed Sustainability Prize
MATCH INFO
Manchester United 2
(Martial 30', McTominay 90 6')
Manchester City 0
UFC%20FIGHT%20NIGHT%3A%20SAUDI%20ARABIA%20RESULTS
%3Cp%3E%0D%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EMain%20card%3Cbr%3EMiddleweight%3A%3C%2Fstrong%3E%0D%3Cbr%3ERobert%20Whittaker%20defeated%20Ikram%20Aliskerov%20via%20knockout%20(Round%201)%0D%3Cbr%3E%3Cstrong%3EHeavyweight%3A%3C%2Fstrong%3E%0D%3Cbr%3EAlexander%20Volkov%20def%20Sergei%20Pavlovich%20via%20unanimous%20decision%0D%3Cbr%3E%3Cstrong%3EMiddleweight%3A%3C%2Fstrong%3E%0D%3Cbr%3EKelvin%20Gastelum%20def%20Daniel%20Rodriguez%20via%20unanimous%20decision%0D%3Cbr%3E%3Cstrong%3EMiddleweight%3A%3C%2Fstrong%3E%0D%3Cbr%3EShara%20Magomedov%20def%20Antonio%20Trocoli%20via%20knockout%20(Round%203)%0D%3Cbr%3E%3Cstrong%3ELight%20heavyweight%3A%3C%2Fstrong%3E%0D%3Cbr%3EVolkan%20Oezdemir%20def%20Johnny%20Walker%20via%20knockout%20(Round%201)%0D%3Cbr%3E%3Cstrong%3EPreliminary%20Card%0D%3Cbr%3ELightweight%3A%3C%2Fstrong%3E%0D%3Cbr%3ENasrat%20Haqparast%20def%20Jared%20Gordon%20via%20split%20decision%0D%3Cbr%3E%3Cstrong%3EFeatherweight%3A%3C%2Fstrong%3E%0D%3Cbr%3EFelipe%20Lima%20def%20Muhammad%20Naimov%20via%20submission%20(Round%203)%0D%3Cbr%3E%3Cstrong%3EWelterweight%3A%3C%2Fstrong%3E%0D%3Cbr%3ERinat%20Fakhretdinov%20defeats%20Nicolas%20Dalby%20via%20split%20decision%0D%3Cbr%3E%3Cstrong%3EBantamweight%3A%3C%2Fstrong%3E%0D%3Cbr%3EMuin%20Gafurov%20def%20Kang%20Kyung-ho%20via%20unanimous%20decision%0D%3Cbr%3E%3Cstrong%3ELight%20heavyweight%3A%3C%2Fstrong%3E%0D%3Cbr%3EMagomed%20Gadzhiyasulov%20def%20Brendson%20Ribeiro%20via%20majority%20decision%0D%3Cbr%3E%3Cstrong%3EBantamweight%3A%3C%2Fstrong%3E%0D%3Cbr%3EChang%20Ho%20Lee%20def%20Xiao%20Long%20via%20split%20decision%3C%2Fp%3E%0A
Mohammed bin Zayed Majlis
Specs
%3Cp%3E%3Cstrong%3EEngine%3A%3C%2Fstrong%3E%201.5-litre%20turbo%204-cylinder%20%2F%202.0%20turbo%204-cylinder%20(S3)%0D%3Cbr%3E%3Cstrong%3EPower%3A%3C%2Fstrong%3E%20148bhp%20%2F%20328bhp%20(S3)%0D%3Cbr%3E%3Cstrong%3ETorque%3A%3C%2Fstrong%3E%20250Nm%20%2F%20420Nm%20(S3)%0D%3Cbr%3E%3Cstrong%3EOn%20sale%3A%3C%2Fstrong%3E%20December%0D%3Cbr%3E%3Cstrong%3EPrice%3A%3C%2Fstrong%3E%20TBA%0D%3C%2Fp%3E%0A
Defence review at a glance
• Increase defence spending to 2.5% of GDP by 2027 but given “turbulent times it may be necessary to go faster”
• Prioritise a shift towards working with AI and autonomous systems
• Invest in the resilience of military space systems.
• Number of active reserves should be increased by 20%
• More F-35 fighter jets required in the next decade
• New “hybrid Navy” with AUKUS submarines and autonomous vessels
UAE currency: the story behind the money in your pockets
The specs
Engine: 4.0-litre flat-six
Torque: 450Nm at 6,100rpm
Transmission: 7-speed PDK auto or 6-speed manual
Fuel economy, combined: 13.8L/100km
On sale: Available to order now
Full list of Emmy 2020 nominations
LEAD ACTOR IN A COMEDY SERIES
Anthony Anderson, Black-ish
Don Cheadle, Black Monday
Ted Danson, The Good Place
Michael Douglas, The Kominsky Method
Eugene Levy, Schitt’s Creek
Ramy Youssef, Ramy
LEAD ACTRESS IN A COMEDY SERIES
Christina Applegate, Dead to Me
Rachel Brosnahan, The Marvelous Mrs. Maisel
Linda Cardellini, Dead to Me
Catherine O’Hara, Schitt’s Creek
Issa Rae, Insecure
Tracee Ellis Ross, Black-ish
OUTSTANDING VARIETY/TALK SERIES
The Daily Show with Trevor Noah
Full Frontal with Samantha Bee
Jimmy Kimmel Live
Last Week Tonight with John Oliver
The Late Show with Stephen Colbert
LEAD ACTOR IN A DRAMA SERIES
Jason Bateman, Ozark
Sterling K. Brown, This Is Us
Steve Carell, The Morning Show
Brian Cox, Succession
Billy Porter, Pose
Jeremy Strong, Succession
LEAD ACTRESS IN A DRAMA SERIES
Jennifer Aniston, The Morning Show
Olivia Colman, The Crown
Jodie Comer, Killing Eve
Laura Linney, Ozark
Sandra Oh, Killing Eve
Zendaya, Euphoria
OUTSTANDING REALITY/COMPETITION PROGRAM
The Masked Singer
Nailed It!
RuPaul’s Drag Race
Top Chef
The Voice
LEAD ACTOR IN A LIMITED SERIES/TV MOVIE
Jeremy Irons, Watchmen
Hugh Jackman, Bad Education
Paul Mescal, Normal People
Jeremy Pope, Hollywood
Mark Ruffalo, I Know This Much Is True
LEAD ACTRESS IN A LIMITED SERIES/TV MOVIE
Cate Blanchett, Mrs. America
Shira Haas, Unorthodox
Regina King, Watchmen
Octavia Spencer, Self Made
Kerry Washington, Little Fires Everywhere
OUTSTANDING LIMITED SERIES
Little Fires Everywhere
Mrs. America
Unbelievable
Unorthodox
Watchmen
OUTSTANDING COMEDY SERIES
Curb Your Enthusiasm
Dead to Me
The Good Place
Insecure
The Kominsky Method
The Marvelous Mrs. Maisel
Schitt’s Creek
What We Do In The Shadows
OUTSTANDING DRAMA SERIES
Better Call Saul
The Crown
The Handmaid’s Tale
Killing Eve
The Mandalorian
Ozark
Stranger Things
Succession
The burning issue
The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.
Read part four: an affection for classic cars lives on
Read part three: the age of the electric vehicle begins
Read part one: how cars came to the UAE
The specs
Price, base / as tested Dh12 million
Engine 8.0-litre quad-turbo, W16
Gearbox seven-speed dual clutch auto
Power 1479 @ 6,700rpm
Torque 1600Nm @ 2,000rpm 0-100kph: 2.6 seconds 0-200kph: 6.1 seconds
Top speed 420 kph (governed)
Fuel economy, combined 35.2L / 100km (est)
Killing of Qassem Suleimani
Read more about the coronavirus
Mohammed bin Zayed Majlis
The%20specs
%3Cp%3E%3Cstrong%3EPowertrain%3A%20%3C%2Fstrong%3ESingle%20electric%20motor%0D%3Cbr%3E%3Cstrong%3EPower%3A%20%3C%2Fstrong%3E201hp%0D%3Cbr%3E%3Cstrong%3ETorque%3A%20%3C%2Fstrong%3E310Nm%0D%3Cbr%3E%3Cstrong%3ETransmission%3A%20%3C%2Fstrong%3ESingle-speed%20auto%0D%3Cbr%3E%3Cstrong%3EBattery%3A%20%3C%2Fstrong%3E53kWh%20lithium-ion%20battery%20pack%20(GS%20base%20model)%3B%2070kWh%20battery%20pack%20(GF)%0D%3Cbr%3E%3Cstrong%3ETouring%20range%3A%20%3C%2Fstrong%3E350km%20(GS)%3B%20480km%20(GF)%0D%3Cbr%3E%3Cstrong%3EPrice%3A%20%3C%2Fstrong%3EFrom%20Dh129%2C900%20(GS)%3B%20Dh149%2C000%20(GF)%0D%3Cbr%3E%3Cstrong%3EOn%20sale%3A%3C%2Fstrong%3E%20Now%3C%2Fp%3E%0A
WITHIN%20SAND
%3Cp%3EDirector%3A%20Moe%20Alatawi%3C%2Fp%3E%0A%3Cp%3EStarring%3A%20Ra%E2%80%99ed%20Alshammari%2C%20Adwa%20Fahd%2C%20Muhand%20Alsaleh%3C%2Fp%3E%0A%3Cp%3ERating%3A%203%2F5%3C%2Fp%3E%0A
Killing of Qassem Suleimani
Killing of Qassem Suleimani
THE SIXTH SENSE
Starring: Bruce Willis, Toni Collette, Hayley Joel Osment
Director: M. Night Shyamalan
Rating: 5/5
Killing of Qassem Suleimani
More on Quran memorisation:
More from Rashmee Roshan Lall
Our legal columnist
Name: Yousef Al Bahar
Advocate at Al Bahar & Associate Advocates and Legal Consultants, established in 1994
Education: Mr Al Bahar was born in 1979 and graduated in 2008 from the Judicial Institute. He took after his father, who was one of the first Emirati lawyers
More on Quran memorisation:
UAE currency: the story behind the money in your pockets
Three-day coronation
Royal purification
The entire coronation ceremony extends over three days from May 4-6, but Saturday is the one to watch. At the time of 10:09am the royal purification ceremony begins. Wearing a white robe, the king will enter a pavilion at the Grand Palace, where he will be doused in sacred water from five rivers and four ponds in Thailand. In the distant past water was collected from specific rivers in India, reflecting the influential blend of Hindu and Buddhist cosmology on the coronation. Hindu Brahmins and the country's most senior Buddhist monks will be present. Coronation practices can be traced back thousands of years to ancient India.
The crown
Not long after royal purification rites, the king proceeds to the Baisal Daksin Throne Hall where he receives sacred water from eight directions. Symbolically that means he has received legitimacy from all directions of the kingdom. He ascends the Bhadrapitha Throne, where in regal robes he sits under a Nine-Tiered Umbrella of State. Brahmins will hand the monarch the royal regalia, including a wooden sceptre inlaid with gold, a precious stone-encrusted sword believed to have been found in a lake in northern Cambodia, slippers, and a whisk made from yak's hair.
The Great Crown of Victory is the centrepiece. Tiered, gold and weighing 7.3 kilograms, it has a diamond from India at the top. Vajiralongkorn will personally place the crown on his own head and then issues his first royal command.
The audience
On Saturday afternoon, the newly-crowned king is set to grant a "grand audience" to members of the royal family, the privy council, the cabinet and senior officials. Two hours later the king will visit the Temple of the Emerald Buddha, the most sacred space in Thailand, which on normal days is thronged with tourists. He then symbolically moves into the Royal Residence.
The procession
The main element of Sunday's ceremonies, streets across Bangkok's historic heart have been blocked off in preparation for this moment. The king will sit on a royal palanquin carried by soldiers dressed in colourful traditional garb. A 21-gun salute will start the procession. Some 200,000 people are expected to line the seven-kilometre route around the city.
Meet the people
On the last day of the ceremony Rama X will appear on the balcony of Suddhaisavarya Prasad Hall in the Grand Palace at 4:30pm "to receive the good wishes of the people". An hour later, diplomats will be given an audience at the Grand Palace. This is the only time during the ceremony that representatives of foreign governments will greet the king.
More from Neighbourhood Watch:
Company%20profile
%3Cp%3E%3Cstrong%3EName%3A%20%3C%2Fstrong%3EMaly%20Tech%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202023%3Cbr%3E%3Cstrong%3EFounder%3A%3C%2Fstrong%3E%20Mo%20Ibrahim%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20Dubai%20International%20Financial%20Centre%3Cbr%3E%3Cstrong%3ESector%3A%3C%2Fstrong%3E%20FinTech%3Cbr%3E%3Cstrong%3EFunds%20raised%3A%3C%2Fstrong%3E%20%241.6%20million%3Cbr%3E%3Cstrong%3ECurrent%20number%20of%20staff%3A%3C%2Fstrong%3E%2015%3Cbr%3E%3Cstrong%3EInvestment%20stage%3A%20%3C%2Fstrong%3EPre-seed%2C%20planning%20first%20seed%20round%3Cbr%3E%3Cstrong%3EInvestors%3A%3C%2Fstrong%3E%20GCC-based%20angel%20investors%3C%2Fp%3E%0A
The five pillars of Islam
