Qatar cuts rates in line with Fed

STOKING INFLATION: Qatar has become the fourth Gulf state with a dollar peg to match last week's US rate cuts. (Getty Images)

Qatar reduced its deposit facility rate by 75 basis points on Sunday, becoming the fourth of five Gulf Arab oil producers with dollar pegs to match last week's US interest rate cut despite rising inflation at home.

Like Saudi Arabia and Bahrain, Qatar lowered its deposit rate to 2.25% to deter bets on an appreciation of its currency but left its lending rate unchanged to avoid stoking inflation running near record highs.

The UAE also lowered interest rates by 75 basis points on Thursday after the US Federal Reserve dropped its benchmark by three-quarters of a percentage point as part of US efforts to stem a slide into recession.

The UAE, Saudi Arabia and Bahrain matched the Fed move on Thursday and Qatar's central bank said it would make a decision on Sunday. Bankers in Doha, who had seen the central bank statement, said it left the lending facility rate unchanged at 5.5% and the repurchase rate at 5.55%.

Oman sets monetary policy at a weekly money market auction.

Gulf central banks are torn between efforts to fight inflation and prevent appreciation of their dollar-linked currencies and many investors expect them to simply give up on their pegs as Kuwait did in May.

At 0700 GMT bids on Qatar riyal forward contracts showed investors betting the currency would appreciate 3.9% to 3.4989 per dollar in a year.

Annual inflation in Qatar rose to 13.74% at the end of December, the second-highest rate on record as food and rent costs surged. (Reuters)

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