Tracking rate cuts made by central banks around the world to tide over the deepening financial crisis, Bahrain lowered its key interest rates on Thursday - the one-week deposit rate and overnight lending rate were reduced by 25 basis points and repurchase rate by 50 basis points Effective immediately, the Central Bank of Bahrain's rate on the one-week deposit facility was put at 1.75 percent, down from the earlier two per cent. The rate on the overnight deposit facility was reduced to 1.25 percent from 1.5 percent previously. The repo and lending rate has been cut to 4.75 percent from 5.25 percent. The kingdom, which pegs its dinar to the dollar, has been following the US Federal Reserve rate cuts from last September and this is the eight in the series of lowered key interest rates since then. With the Kingdom's central bank responding to the series of rate cuts by the US Federal Reserve, the CBB key policy rate was down to 2.25 percent by the end of the first quarter of the year. The rate cut by the kingdom's central banking authority came after four days of sharp decline in the regional bourses, including the Bahrain Stock Exchange that fell to its lowest in the last 52 weeks on Wednesday. The Bahrain benchmark traded 2.4 percent higher at 2,322 points after the central bank announced the rate cut. The Bahrain bourse lost 14 percent since June, but still fared better compared to the other regional bourses, which suffered huge losses during the tumultuous period. Bahrain's rate cut move also comes a day after Kuwait slashed its key discount interest rate by 125 basis points and the United Arab Emirates reduced it by 50 basis points against the backdrop of Arab stock markets slipping over growing fears of the global financial turmoil seeping into the region. Meanwhile, the Saudi Arabian Monetary Agency announced its readiness to pump SR50 billion into the system while Qatar ruled out lowering of interest rates, saying its economy remained solid. “It will improve sentiment but the market, in line with the region, probably needs a bit more than that. More important is liquidity, the central bank needs to provide that now,” the Head of Asset Management at Bahrain-based SICO, Shakeel Sarwar Butt, was quoted as saying by Reuters. Central banks around the GCC region have been maintaining that their financial systems were immune to the global financial turmoil and that they had little exposure to the trouble torn Western financial institutions and economies.
