RIYADH. The Saudi Central Bank (SAMA) announced a 25-basis-point reduction in its benchmark interest rate to 5 percent, marking its third rate cut this year as the Kingdom aligns with the U.S. Federal Reserve’s monetary easing cycle.
SAMA lowered its repurchase agreement rate to 5 percent and the reverse repurchase agreement rate to 4.5 percent. This follows a more substantial 50-basis-point cut implemented in September, signaling a broader shift in monetary policy as global inflationary pressures show signs of cooling.
“This decision is in line with SAMA‘s mandate of preserving monetary stability in the context of global developments,” SAMA stated in its official announcement.
The move mirrors the Fed’s latest action, which reduced its target range to 4.25-4.5 percent, highlighting the synchronized nature of Gulf monetary policy due to dollar-pegged currencies.
Economic Implications
The rate cut is expected to provide significant stimulus to Saudi Arabia’s non-oil sectors, a crucial component of Vision 2030. The decision marks a notable shift from the two-year tightening cycle that saw aggressive rate hikes to combat inflation. While U.S. inflation remains above the Fed’s 2% target, the trend toward normalization has provided central banks with room to ease monetary policy.