MUSCAT, NOV 11 - Monetary easing by the US Fed was a welcome development for Oman, according to Tahir Salim al Amri, Executive President – Central Bank of Oman (CBO). “The ensuing decrease in policy rates in Oman and the rest of the GCC countries bodes well to fast-track economic recovery in Oman and the GCC region,” he said in a foreword to the 2019 Financial Stability Report (FSR) published last week. During 2018, the US Fed continued to tighten its monetary policy stance by raising its policy rate four times in a bid to transform from a crisis-management monetary policy to the normal regime.
However, no further increase in the Fed rate is expected in 2019 as the Fed signaled the end of the rise in interest rate. “Oman follows a fixed exchange rate regime and hence its policy rate (the repos rate) is changed mechanically with the USD Libor to keep it closely aligned to the federal funds target range. Therefore, interest rates in Oman also increased in tandem with the Fed’s policy rate,” the apex bank explained. The CBO’s repo rate increased to 2.93 per cent in December 2018 from 1.95 per cent in December 2017. Similarly, the inter-bank overnight interest rates also increased to 2.14 per cent in December 2018 from 1.26 per cent in December 2017.
Rising policy rates have also been passed through to some extent to the retail deposit and lending rates, the report said. The average interest rate on RO deposits of conventional banks increased to 1.89 per cent in December 2018 up from 1.67 per cent a year earlier. Similarly, the average lending rate on RO loans of conventional banks also increased to 5.33 per cent in December 2018 as compared to 5.20 per cent in December 2017.
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