Saudi Interbank Interest Rate Drops for First Time in 3 Monthsby
One of Saudi Arabia’s key interest rates fell for the first time in three months amid a rebound in oil prices and indications the U.S. won’t rush to increase borrowing costs.
The three-month Saudi Interbank Offered Rate, a benchmark used to price loans, fell less than 1 basis point to 2.23091 percent on Wednesday, its first decline since March 23, according to data compiled by Bloomberg. The rate has risen 68 basis points this year and is at about the highest level in more than seven years, the data show.
“Saibor is reaching a stabilization phase after its rapid rise and we are seeing some extra funds in the market with government institutions and corporates, driven by payments for government projects and the recent increase in oil prices,” said Abdulwahid Al Matar, Saudi Hollandi Bank’s Riyadh-based head of trading. “The Fed has also lowered expectations of rate hikes this year, from three about three months ago to possibly one by the year-end.”
Federal Reserve Chair Janet Yellen this week signaled that U.S. policy makers might be taking a more cautious outlook on the economy, boosting bets that they’ll keep interest rates lower for longer. Oil, Saudi Arabia’s main source of revenue, also climbed to $50.66 per barrel at 2:45 p.m. in Riyadh, up 61 percent from a 12-year low reached in January.
Fifteen banks in the kingdom participate in setting the rate. The submissions of Bank Albilad and Saudi Hollandi Bank declined on Wednesday, the data show.