Central Bank of Oman raises its repo rate to 4.5%

The Central Bank of Oman raised the repo rate on operations with local banks by 25 basis points to 4.5%. The new rate took effect on 17 September, according to Times of Oman and a Zawya report. The central bank linked the move to Oman’s fixed exchange-rate system. It also cited monetary and financial stability and the need to contain inflationary pressures.

The repo rate influences the cost at which local banks obtain short-term funding from the central bank. Oman’s rial is pegged to the US dollar. The move followed the US Federal Reserve’s 25-basis-point rate increase on 16 September, and most other Gulf central banks also raised their policy rates the same day, while Kuwait held.

PEG SHAPES THE POLICY RESPONSE

The central bank’s explanation connected the rate increase to maintaining the peg and preserving stability. It said the measure would also help reduce unwanted cross-border capital flows and boost investor confidence by reducing the risks of exchange-rate fluctuations.

The Fed raised the target range for the federal funds rate to 3.75%–4%, its first increase since 2023, in a unanimous 12–0 vote.

The increase was the central bank’s first since July 2023, Zawya reported.