The Qatar Central Bank (QCB) is expected to cut repo rate by 1.56% or 156 basis points in 2024 with the end of year rate reaching 4.44%, according to Kamco Invest.
Quoting Bloomberg consensus estimates, Kamco also said the lending rate in Qatar is expected to be slashed by 1.56% to 4.69% by end-2024.
The move could greatly help the private sector, which is on its path of recovery, as reflected from the Qatar Financial Centre's purchasing managers' index surveys.
Qatar had seen a 0.75% hike in repo rate to 6% in 2023. Since January 2022, there has been a 5% increase in repo rate in the country.
The QCB had been maintaining that it would continue to assess economic conditions, taking into account all aspects that may affect financial stability and will review its monetary policy when necessary to address any changes in economic requirements.
Finding that the trend in interest rates in the Gulf Co-operation Council (GCC) is almost in line with the US Federal Reserve, the Kamco report said for the region, "we have forecasted rates based on US Fed rate cuts."
As a result, most central banks in the GCC would slash rates in line with the US Fed due to the pegged currencies, even as Kuwait has its currency pegged to a basket of currencies.
Forecasting a 1% cut by the Kuwait Central Bank in its discount rate, it said this is lower than the cuts in the rest of the GCC countries as Kuwait has made the smallest aggregate rate hike in the GCC since 2022 (275 bps) and since the start of the year (75 bps).
"We believe that the roll back of rates would also be smaller than the rest of the GCC," the report said.
On the international front, it said the consensus estimates on policy rates by major central banks shows cuts across the globe in 2024, ranging from over 200bps to 50bps.
The Fed is forecasted to lower rates by 156bps in 2024 with end of year rates to be at 3.82%. The eurozone is slated to make "more aggressive" rate cuts, slashing policy rates by 219bps with end of year rates reaching 2.31%.
Similarly, the UK, Canada and New Zealand are forecasted to lower rates by around 100bps this year.
The slowing inflation seen over the last few months have "drastically" altered investor and trader’s expectation for the fixed income market, it said.
The last meeting of the year was instrumental in changing the rate cut/pause forecasts for 2024.
From a scattered expectation of one or two hikes in 2024 during the later half of the year just a few months ago, the consensus forecast now shows at least 150bps cuts during 2024, according to Kamco.
Some economists see earlier rate cuts in the US as against second half of 2024 cuts as per previous expectations.