Kuwait and the United Arab Emirates cut interest rates on Wednesday after the US Federal Reserve slashed its benchmark rate for the first time in more than four years.

Kuwait, the Middle East's fourth-largest oil exporter, cut its repurchase rate by 50 basis points to 4.75 percent, the central bank said.

It had cut the rate by 25 basis points last week.

 The UAE, which pegs its currency to the US dollar, cut its one-week, one-month and three-month certificate of deposit (CD) interest rates by 15 basis points, the central bank said.

The second-largest Arab economy does not have a benchmark interest rate. It cut the one-week CD to 4.60 percent from 4.75 percent and the one-month CD rate to 4.70 percent from 4.85 percent.

The UAE and its neighbours in Saudi Arabia, Qatar, Oman and Bahrain are under pressure to follow any US rate cut to maintain the relative value of their dollar-pegged currencies.

The Gulf Cooperation Council, which groups the five countries plus Kuwait, had agreed to keep pegs to the tumbling US dollar in place until the region created a single currency in 2010. But Kuwait abandoned its peg to the dollar on May 20, saying the U.S. currency's weakness was fuelling inflation by making imports more expensive.

"With a US-pegged currency regime, the GCC should mimic what the Fed has done, otherwise it could increase speculative interest in currency markets," Standard Chartered Middle East economist Steve Brice said in a note.

Central bank policy-makers in the United States unanimously decided on Tuesday to cut the benchmark federal funds rate by 50 basis points to 4.75 percent in a bold bid to shield the economy from a housing slump and financial turbulence.

UAE Central Bank Governor Sultan Nasser al-Suweidi told Reuters last week the bank would track any US rate cut, confident the move would not fuel inflation, now at a 19-year peak.

The UAE cut the three-month CD rate to 4.80 percent, from 4.95 percent, and the longer-term six-month rate by 20 basis points to 4.80 percent from 5 percent.

Kuwait's central bank left the benchmark discount rate unchanged at 6.25 percent.  The US currency remains a large part of the basket against which Kuwait measures the value of its dinar. - Reuters