Muscat: The Central Bank of Oman (CBO) has increased its repo rate for local banks by 75 basis points to stand at 3.75 per cent. The move comes after the US Federal Reserve’s recent announcement to hike its key policy rate.
The Central Bank of Oman’s monetary policy target is to sustain and maintain its fixed exchange rate. This policy is aligned with the structure and nature of the Omani economy. There are a number of advantages for the Sultanate of Oman that is derived from this policy, namely ensuring the stability of the Omani Rial, mitigating capital outflow and promoting certainty among investors by removing exchange rate risk.
The CBO has cautioned banks not to increase the cost of borrowing to consumers given ample liquidity in the system.
The global economy is witnessing rising and sustained inflationary pressure and as such, central banks in a number of countries are attempting to address this pressure by hiking their respective key policy rates with the objective of reducing lending and by default reducing aggregate demand that in turn would translate into reduced consumption.
While higher interest rates are expected to lead to lower inflation, in some cases, as related to consumers in high-income brackets, they could result in higher savings.