The US Federal Reserve (Fed) lowered its policy rate by 25bpts (0.25%) on October 29, prompting the majority of GCC central banks to follow with similar cuts.
As widely expected, the Fed cut its policy rate by 25bpts to a target range of 3.75%-4%, despite some concerns over the lack of visibility of macro conditions, caused by the current US government shut down delaying the publication of some key data.
Due to this, Fed Chair Jerome Powell sounded tentative over the prospects of another cut at the next Federal Open Market Committee meeting in December, although the path for policy is likely to be for more easing over 2026.
Oxford Economics’ forecast has three more quarter-point cuts by the end of next year.
Consequent on the Fed decision, Qatar Central Bank (QCB) had reduced the interest rates for deposits, lending and repo by 0.25% or 25 basis points (bps).
The new rates took effect on October 30, according to QCB.
Qatar Central Bank’s deposit rate (QCBDR) is now 4.10%, lending rate (QCBLR) 4.60% and repo rate (QCBRR) 4.35%.
The surprise exception, according to reports, was the Central Bank of Kuwait, which decided to keep its policy unchanged, stating that its monetary policy was consistent with local economic conditions.
Monetary easing for the remaining GCC will help lift investment and consumer spending, providing a boost to domestic demand, according to Oxford Economics.
GCC central banks, particularly those with currencies pegged to the US dollar including Qatar, typically mirror the US Federal Reserve’s monetary policy to maintain exchange rate stability. Therefore, if the Fed starts cutting rates, GCC countries are expected to follow suit.
Analysts say rate cuts affect domestic demand through three main channels: lower borrowing costs, wealth and confidence effects and fiscal–monetary interaction.
For GCC countries reduced policy and lending rates will translate into cheaper financing for businesses and consumers.
This could encourage corporate investment (especially in non-oil sectors like real estate, manufacturing, and services) and household spending (on housing, durable goods, etc.).
However, the degree of impact depends on the depth of the credit market and consumer sentiment, which varies across the GCC.
Easier monetary conditions often boost asset prices (equities and real estate), improving household and business balance sheets.
Analysts believe that this, in turn, supports confidence and spending—particularly in countries with vibrant financial markets such as Qatar, the UAE and Saudi Arabia. Given the GCC’s strong fiscal buffers, government spending remains the dominant driver of demand. Lower rates can complement expansionary fiscal policies, especially if governments are investing in diversification projects under Vision 2030 or similar national plans across the GCC.
However, some economists argue that despite these positives, a few structural factors may dilute the impact.
Since the GCC must follow the Fed to protect currency pegs, rate cuts are not always driven by local conditions, they argue highlighting limited monetary independence.
Many GCC banks already have abundant liquidity, so cheaper policy rates may not dramatically alter lending volumes, they point out.
Also, it is argued that if inflation remains sticky (e.g., from imported food or housing), policymakers may move cautiously to avoid overheating.
If the Fed begins an easing cycle this year itself—as markets expect—the GCC’s parallel rate cuts should provide modest but noticeable support to domestic demand, especially in private credit growth, retail spending, and construction.
It will also reinforce non-oil sector expansion, helping governments meet diversification targets.
The move will also keep the real estate and equity markets buoyant, improving the overall business sentiment in the region.
GCC rate cuts in line with the Fed’s would undoubtedly boost domestic demand moderately, particularly through cheaper credit and stronger confidence.
That said, the scale of the impact will depend on each country’s fiscal stance, private sector dynamism, and existing liquidity conditions.