Gulf’s Holdout on Rates Is About to Jump on Fed Easing Bandwagon - Bloomberg

Gulf’s Holdout on Rates Is About to Jump on Fed Easing Bandwagon - Bloomberg:

The only Gulf Arab central bank with an unpredictable monetary policy might finally fall in line this week.

In a region where most countries usually track the Federal Reserve to protect their currencies’ pegs to the dollar, Kuwait split from the likes of Saudi Arabia and the United Arab Emirates, standing pat when U.S. interest rates were lowered in July and September. But now that the Fed is widely expected to deliver another cut, Kuwait is likely to pull the trigger too, even as inflation accelerates.

As pressure builds on funding costs at Kuwaiti banks and with this year’s economic growth forecast at just above zero, the probability of its first monetary easing since 2012 is “very high,” according to Raghu Mandagolathur, head of research at Kuwait Financial Centre SAK. Unlike its neighbors’ pegs to the dollar, Kuwait controls the value of its dinar against an undisclosed basket of currencies, meaning it has more flexibility in setting rates.