Qatar central bank cuts interest rates

On The Wires: For the first time in eight months Qatar is cutting interest rates after the numbers applying for credit slow.

Qatar's central bank cut interest rates for the first time in eight months after a slowdown in credit growth.

The bank cut the benchmark overnight lending rate by 50 basis points to 5 per cent, and the deposit rate by the same amount to 1 per cent Governor Abdullah Al Thani said today in a telephone interview. He didn't give a reason for the move. The last reduction in August aimed to counter deflation and low borrowing costs worldwide, the central bank said at the time.

Growth in Qatari bank credit dropped to 10 per cent in February, the slowest pace since 2009, according to central bank data. The slowdown came amid political turmoil in the Middle East, with unrest in Tunisia and Egypt spreading into some of Qatar's Gulf neighbours such as Bahrain.

"We see the cut in lending and deposit rates as a move to support private-sector credit growth," said Monica Malik, an economist at Cairo-based investment bank EFG-Hermes Holding SAE. "There is substantial room to reduce the lending rate."

Qatar, the world's fastest-growing economy, held interest rates at levels higher than in other Gulf nations as the global financial crisis crimped borrowing in the region. Its inflation rate rose to 1.8 per cent in February, after the country experienced deflation for most of 2010.

Qatar forecasts economic growth of 15.7 per cent this year, slowing to 7.1 per cent in 2012. The largest exporter of liquefied natural gas, it has a population of about 850,000 and the world's highest per-capita gross domestic product, according to the CIA World Factbook.

Qatar's benchmark stock index has declined 3.1 per cent this year after climbing almost 25 per cent in 2010.

Bloomberg News