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Monetary Policy Transmission in Oman
Author:
Thomas Kroen
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Series:
Selected Issues Papers
Volume/Issue:
Volume 2024: Issue 018
Language:
English
Publication Date:
13 Jun 2024
DOI:
https://doi.org/10.5089/9798400278358.018
ISBN:
9798400278358
ISSN:
2958-7875
Pages:
9
Keywords:
monetary policy transmission; Oman's policy rates move; Fed policy rate hike; transmission from policy; credit growth; Deposit rates; Credit; Central bank policy rate; Excess liquidity; Interest rate ceilings
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IMF Selected Issues Papers are prepared by IMF staff as background documentation for periodic consultations with member countries. It is based on the information available at the time it was completed.
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Amid a pegged exchange rate to the US dollar and an open capital account, Oman’s policy rates move closely with US monetary policy. In this analysis, we show empirically that transmission from policy rates into effective lending and deposit rates remains subdued in Oman, even compared to GCC peers that similarly face a high oil price environment with persistent excess liquidity in the banking system. A cap on personal loan rates and low exposure of banks to SMEs and riskier borrowers limit passthrough into effective lending rates and credit conditions. The note documents ongoing actions by Omani policymakers to strengthen transmission and provides further recommendations on liquidity management, reserve management, and relaxing the interest rate cap.
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Cover Selected Issues Papers
Selected Issues Papers
Publisher:
International Monetary Fund