Saudi Arabia, which pegs its riyal currency to the dollar, reduced its reverse repurchase rate by 25 basis points on Saturday after a US rate cut, but continued with a policy of leaving its benchmark lending rate steady.

The Saudi Arabian Monetary Agency (Sama) cut the reverse repo to two per cent from 2.25 per cent and left the benchmark repurchase rate at 5.5 per cent, bankers in Riyadh said, reading from a central bank circular.

Sama also raised bank reserve requirements to 13 per cent from 12 per cent and doubled the time saving deposits for customers to 4 per cent from 2 per cent, they added.

The central bank of the world's largest oil exporter usually communicates interest rate decisions only to banks, sometimes confirming them in a public statement.

The Federal Reserve lowered US interest rates by a quarter percentage point, as expected, and hinted the move could be the last in a series meant to buffer the economy from a credit crunch and housing downturn.

The Fed has slashed rates seven times by a total of 3.25 per cent since September 18. Dollar pegs compell Gulf states to track the Fed to maintain the relative value of their currencies.-Reuters