Oman Plans to Maintain Rates

Oman will keep interest rates close to zero for the foreseeable future to prevent a further surge of liquidity into the region country's banking system, the central bank announced yesterday.The sultanate has been keeping the rate it uses for draining excess liquidity from the market at around 0.04% at its weekly auctions of deposit certificates, which is near the lower end of the US benchmark rate range."The interest rates will stay low because of excess liquidity in the banking sector," Central Bank of Oman executive president Hamood Sangour Al Zadjali said.

Federal Reserve's benchmark overnight interest rates are expected to stay in a range of zero to 0.25% for an extended period, but Fed policymakers offered divergent signals last week. Oman lacks an independent monetary policy because, like most of its fellow oil producers, it pegs its rial currency to the dollar to import low inflation from overseas.The non-Opec member needs to keep its rates more or less in line with the Fed to avoid excessive pressures on its peg to the greenback, but can make adjustments to affect liquidity.The Oman central bank drained US$1.18 billion from the market in Monday's CD auction at an average rate of 0.04%. - Gulf Daily News