Saudi Arabia's central bank on Monday lowered the benchmark repurchase rate to 2.0 percent from 2.5 percent, and the reverse repurchase rate from 1.5 to 0.75 percent, effective immediately. “The current market conditions warrant a further adjustment of policy rates, which are currently misaligned,” the Saudi Arabian Monetary Agency (SAMA) said while noting that the domestic market was responding positively to earlier measures. Saudi stocks were little changed in the wake of the rate announcement, the Tadawul All-Shares index down 0.02 percent at 11:40 am (0840 GMT) after five straight days of losses. It was the fifth straight cut in the repo rate -- the rate SAMA charges commercial banks for funds – since Oct. 13, when it reversed its tough anti-inflation stance to combat tightening liquidity in the banking sector. Since then the rate has fallen by 3.5 percentage points. “The concern is that as the private sector is beginning to show signs of a slowdown, and inflation is clearly on the downward trend,” John Sfakianakis, chief economist with the Saudi British Bank, said in a telephone interview from Riyadh. “SAMA has taken an aggressive step in order to help private sector growth.” The reduction comes amid mounting worries of slowing growth in the Saudi economy, following the plunge in the price of crude oil, the country's main source of earnings. Last week Cairo-based investment bank EFG-Hermes said in a report that the Saudi economy is likely to shrink 0.9 percent in 2009, compared to its estimate of 6.2 percent growth in 2008. In a report on Jan.18, the Jeddah-based National Commercial Bank said liquidity remains a problem within the banks, threatening to force a slowdown in lending. The bank called on the government to inject medium-term funding into the banking system to help sustain lending, and to relax loan
