RIYADH, Jan 19: In order to increase liquidity in the markets and help boost economic growth in the economy, Saudi Arabia’s central bank, SAMA has announced cutting its repurchase rate to two per cent from 2.5 per cent and the reverse repurchase rate to 0.75 per cent from 1.5 per cent.

By cutting these two key interest rates, the kingdom, the largest economy in Arab world, appears looking to offset the tightening of credit markets stemming from the global financial crisis, analysts maintained here.

In a statement on Monday, the Saudi Monetary Agency said: “SAMA has been closely monitoring money market developments following its monetary measures taken since October 2008. Domestic money market rates have positively responded to monetary stimulus and the recent global easing in inter-bank rates.”

“The current market conditions warrant a further adjustment of policy rates, which are currently misaligned. Against this backdrop, SAMA has decided to lower the repo rate from 2.50 per cent to two per cent and the reverse repo rate from 1.50 per cent to 75 basis points, effective immediately. These measures should help to ensure that credit is available to genuine corporate demand at lower rates”.

Saudi Arabia’s annual inflation eased to nine per cent in December from 9.5 per cent in November as increases in rents and food prices slowed, the Saudi Press Agency said.

Housing rose 17.7 per cent, down from 18.1 per cent in November, while food and beverages prices increased 11.3 per cent, less than the 13.5 per cent in the previous month, SPA reported, citing the Central Department of Statistics and Information.

Inflation is expected to further decline to 7.5 per cent from 9.9 per cent in 2008.