(MENAFN- Muscat Daily) Following their softening in the first half of 2014 the downside bias on interest rates in the sultanate is expected to continue for the rest of the year according to the CBO chief.
'Interest rates globally regionally and locally have been on the downside. I expect this to continue until growth in the big economies such as the US and Europe starts to revive. This year interest rates will continue to be sluggish and I do not expect any increase in rates - both for deposits and loans' H E Hamood Sangour al Zadjali told Muscat Daily on the sidelines of the 'Technology Evolutions & Banking' conference on Tuesday.
In the first half of 2014 commercial banks' deposit and lending rates softened significantly. The weighted average interest rate on rial deposits dropped to 1.04 per cent in June 2014 from 1.25 per cent a year ago while the weighted average rial lending rate decreased from 5.51 per cent to 5.2 per cent.
'We have good liquidity in the system. Banks have used the liquidity to provide loans to different sectors of the economy which will benefit the whole economy' H E Zadjali said.
On whether the central bank plans to raise its repo rate in the near future H E Zadjali said 'The policy rate will stay for some time to come because there is no need for an increase. Banks are not borrowing from the CBO so the policy rate will be kept stable. Banks can access this facility if required but are probably holding back due to excess liquidity in the sector.'
CBO's repo rate - the policy rate for injection of liquidity - has remained unchanged at one per cent since March 2012.
The overnight rial domestic inter-bank lending rate – the rate at which banks extend loans to one another for a specified term – also declined to 0.128 per cent in June 2014 from 0.156 per cent a year ago.<
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