With 90,000 cases and more than 3,000 deaths worldwide in 77 countries and territories, the virus outbreak has weighed on global markets on fears it could cause a recession/Bloombergby Kudakwashe Muzoriwa
The Saudi Arabia Monetary Authority (SAMA), the Central Bank of the UAE (CBUAE) and the Central Bank of Bahrain (CBB) have cut key interest rates by 50 basis points following an emergency move by the US Federal Reserve in response to the impact of the coronavirus outbreak.
SAMA said that in light of global developments, the regulator has decided to cut the repo rate by 50 basis points from 2.25 per cent to 1.75 per cent and the reverse rate from 1.75 per cent to 1.25 per cent.
Similarly, CBB also decided to cut its key policy interest rate on the one-week deposit facility from 2.25 per cent to 1.75 per cent.
CBB also reduced the overnight deposit rate from two per cent to 1.50 per cent and adjust the one-month deposit rate from 2.45 per cent to 2.20 per cent. The central bank said that the lending rates remain unchanged at four per cent.
CBUAE also said that it was cutting interest rates on certificates of deposit and its repo rate for borrowing short-term liquidity by 50 bps.
The repo rate applicable to borrowing short-term liquidity from CBUAE against certificates of deposits has also been reduced by 50 basis points.
Certificates of deposit, which the central bank issues to banks operating in the country, are the monetary policy instrument through which changes in interest rates are transmitted to the UAE banking system.
The US Federal Reserve slashed interest rates by half a percentage point in the first such emergency move since the 2008 financial crisis, amid mounting concern that the coronavirus outbreak threatens to stall the record US economic expansion.
Jerome Powell, US Federal Reserve Chairman, said, “The spread of the coronavirus has brought new challenges and risks.”
Powell acknowledged that the Fed doesn’t have all the answers, adding that it would take a multi-faceted response from governments, health care professionals, central bankers, and others to stem the human and economic damage.
The Reserve Bank of Australia also reduced the cash rate by a quarter percentage point to 0.5 per cent in response to China’s slowdown and the fallout from the coronavirus. The interest-rate cut is expected to operate in tandem with fiscal measures to cushion the economic blow.
Reuters reported that with 90,000 cases and more than 3,000 deaths worldwide in 77 countries and territories, the virus outbreak has disrupted global supply chains, triggered cancellations of major economic events and weighed on global markets on fears it could cause a recession.