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Qatar cuts overnight deposit rate by 50 bps-source

Qatar leaves other key rates unchanged - source.

August 11, 2010 10:57 by

Qatar’s central bank changed its overnight deposit facility for the first time in more than two years, lowering it by 50 basis points to 1.5 percent while leaving other key interest rates unchanged, a source said on Wednesday.

A spokesman for the Qatar Central Bank was not immediately available for comment.

The world’s largest natural gas exporter, Qatar did not join a wave of rate cuts by central banks in the region, Europe and the United States during the global financial crisis and has kept its main rates unchanged since May, 2008.

“They cut the overnight deposit facility by 50 basis points to 1.5 percent, other rates remained unchanged,” said the banking source.

Like most Gulf Arab states, Qatar’s currency is pegged to the U.S. dollar, prompting countries to track U.S. interest rate moves. Kuwait dropped the peg in 2007 in favour of a basket of currencies.

“Lowering the lending rate will boost the economy by reducing the cost of funds, allowing banks and investors to borrow more,” said the chief executive officer of a Doha-based bank.

“It will help the stock market as well, as the yield on the stock market will be higher than the deposit rate. People will start investing more money into the stock market.”

(Reporting by Martin Dokoupil; Editing by Amran Abocar and Jason Neely)

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