Argaam Macro: Overview of US rates ahead of today’s Fed decision

Markets are awaiting the Federal Reserve's interest-rate decision at its last meeting this year, scheduled for today, Dec. 18, amid expectations of a 25-basis-point (bp) cut.

If the interest-rate reduction is approved, it will be the third this year, as the US central bank slashed rates by 25 bps last November, to a range between 4.50% and 4.75%.

The following chart shows the development of US interest rates:

The Saudi Central Bank (SAMA) typically follows the Fed's rate decision, as the Saudi riyal is pegged to the US dollar.

Last November, SAMA reduced the reverse repurchase agreements (reverse repo) by 25 bps from 500 to 475 bps and cut the repo agreements rate by 25 bps from 550 to 525 bps.

The reverse repo is the rate at which banks deposit money with the central bank. The repo is the rate used by SAMA to lend money to banks.

The charts below show the development of repo and reverse repo rates in Saudi Arabia:

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