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Saudi unlikely to change repo rate in Q3

Riyadh, June 28, 2009

Saudi Arabia is unlikely to change its benchmark lending rate in the third quarter, a Reuters poll showed, after its central bank sought to boost lending by halving the rate it pays to commercial banks for deposits.

The world's top oil exporter's economy is expected to contract 0.2 percent in 2009 at constant prices compared to 4.2 percent growth last year, according to median forecasts of 14 economists and analysts. 

The Saudi Arabian Monetary Authority (Sama) on June 16 lowered to 0.25 percent its reverse repo rate, prompting some analysts to expect a follow-on cut to its benchmark repo rate, which has remained unchanged at 2 percent since Jan. 19.

Four of those polled said they expected the Gulf Arab state to change its repo rate before the end of this year, with two specifying a cut, and a third an increase. The fourth economist polled declined to give a figure.

Another four saw a change coming either in 2010 or 2011, with three predicting an increase to the benchmark, a fourth declining to give a figure.

"Given that SAMA has been cutting its reverse repo rate while keeping the repo rate on hold is an indication that it could be ensuring it has further ammunition up its sleeves in case credit growth shows more signs of weakness", Mohamed Rahmy, an analyst at EFG-Hermes who also participated in the June 23-25 poll, said.-Reuters




Tags: Saudi Arabia | repo rate |

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