OM Interest Rate Decision: October 2025 Analysis and Macro Outlook
The Central Bank of OM cut its benchmark interest rate by 25 basis points to 4.50% in late October 2025, marking the third consecutive easing since September 2024. This move aligns with moderating inflation and softer economic growth signals. Financial markets reacted with mixed sentiment, reflecting cautious optimism amid external geopolitical risks and fiscal consolidation efforts. Forward guidance suggests a balanced approach amid global uncertainties and domestic structural reforms.
Table of Contents
The Central Bank of OM’s latest Interest Rate Decision on October 29, 2025, lowered the policy rate to 4.50%, down from 4.75% in September 2025 and 5.50% a year ago. This marks a clear easing cycle over the past 13 months, reflecting a shift from tightening to accommodative monetary policy amid slowing inflation and growth pressures.
Drivers this month
- Inflation eased to 3.20% YoY in September, down from 4.10% in July.
- GDP growth slowed to 1.80% YoY in Q3 2025, below the 2.50% average of the past two years.
- Global commodity prices stabilized, reducing imported inflation risks.
Policy pulse
The 4.50% rate sits below the 12-month average of 5.00%, signaling a dovish stance aimed at supporting domestic demand. The central bank’s inflation target remains 2.50%, with the current rate reflecting a cautious approach to avoid overheating while fostering growth.
Market lens
Immediate reaction: The OM rial weakened 0.30% against the USD within the first hour post-announcement, while the 2-year government bond yield dropped 15 basis points, signaling market relief but cautious sentiment.
Core macroeconomic indicators underpin the rate cut decision. Inflation has steadily declined from a peak of 6.50% YoY in early 2024 to 3.20% in September 2025, driven by lower energy prices and subdued wage growth. Meanwhile, GDP growth has moderated, with Q3 2025 recording 1.80% YoY growth versus 3.00% in Q3 2024.
Inflation and growth trends
- Consumer Price Index (CPI) rose 0.20% MoM in September, down from 0.50% in July.
- Unemployment rate steady at 5.40%, slightly above the 5.00% average over the past three years.
- Manufacturing PMI contracted to 48.70 in October, indicating mild sectoral weakness.
Fiscal policy & government budget
Fiscal policy remains moderately tight, with the government targeting a deficit of 3.50% of GDP in 2025, down from 4.20% in 2024. Public debt stands at 58% of GDP, stable but with limited fiscal space. Recent budget adjustments focus on infrastructure spending and social welfare, balancing growth support with fiscal prudence.
External shocks & geopolitical risks
OM faces ongoing geopolitical tensions in its region, impacting trade routes and investor confidence. Commodity price volatility, especially oil, remains a key risk. However, recent diplomatic progress has eased some uncertainties, supporting a more stable external environment.
Financial market indicators show a mixed response. The OM rial depreciated modestly, while short-term government bond yields declined, reflecting expectations of prolonged accommodative policy. Inflation breakeven rates have also softened, suggesting market confidence in inflation containment.
This chart highlights a sustained easing trend in OM’s policy rate, signaling a shift from inflation control to growth support. The market’s cautious optimism suggests that while risks remain, the central bank’s approach is well-calibrated to current conditions.
Market lens
Immediate reaction: The OM rial (OMR/USD) weakened 0.30% post-announcement, while 2-year yields dropped 15 basis points, reflecting relief but cautious sentiment amid geopolitical risks.
Looking ahead, the central bank’s forward guidance suggests a cautious stance, balancing growth support with inflation vigilance. The macroeconomic environment remains vulnerable to external shocks and geopolitical tensions, which could influence future policy moves.
Bullish scenario (30% probability)
- Inflation continues to ease below 3%, allowing further rate cuts to 4.00% by mid-2026.
- GDP growth rebounds above 3%, supported by fiscal stimulus and stable external conditions.
- OM rial stabilizes or strengthens due to improved investor confidence.
Base scenario (50% probability)
- Inflation hovers around 3.00-3.50%, with rates steady at 4.50% through 2026.
- GDP growth remains moderate at 2.00%, with fiscal consolidation continuing.
- Financial markets remain cautious but stable amid geopolitical uncertainties.
Bearish scenario (20% probability)
- Geopolitical shocks or commodity price spikes push inflation above 4%, forcing rate hikes back to 5.00%.
- GDP growth stalls or contracts, exacerbated by fiscal tightening and external shocks.
- OM rial depreciates sharply, increasing inflationary pressures.
The October 2025 interest rate cut in OM reflects a pragmatic response to evolving economic conditions. The central bank’s shift towards easing supports a fragile growth outlook while maintaining vigilance on inflation. External risks and fiscal policy will remain key variables shaping the trajectory of monetary policy. Market participants should monitor geopolitical developments and core inflation trends closely for signals of future adjustments.
Selected tradable symbols relevant to this analysis include OMC (OM-based stock index, sensitive to domestic monetary policy), OMRUSD (OM rial vs. USD, directly impacted by rate changes), BTCUSD (crypto asset often reacting to macro shifts), OMF (financial sector ETF, sensitive to interest rate moves), and EURUSD (major currency pair influencing regional trade and capital flows).
Key Markets Likely to React to Interest Rate Decision
The OM interest rate decision typically influences several key markets. The OMC index tracks domestic equity sentiment tied to monetary policy shifts. The currency pair OMRUSD reflects capital flows and monetary stance. The financial sector ETF OMF is sensitive to interest rate changes affecting lending margins. On a broader scale, the EURUSD pair impacts trade dynamics, while BTCUSD often reacts to shifts in risk sentiment and liquidity conditions.
Interest Rate vs. OMC Index Since 2020
Since 2020, the OM interest rate and the OMC index have shown an inverse relationship. Rate hikes from 2023 to early 2024 coincided with a 12% decline in OMC, while easing cycles since mid-2024 have supported a 15% rebound. This dynamic underscores the sensitivity of domestic equities to monetary policy shifts.
FAQs
- What was the latest OM Interest Rate Decision?
- The Central Bank of OM cut the benchmark rate to 4.50% on October 29, 2025, down from 4.75% in September.
- How does the interest rate affect OM’s economy?
- Lower rates reduce borrowing costs, support growth, and can ease inflation pressures, but also risk currency depreciation.
- What are the risks to OM’s monetary policy outlook?
- Geopolitical tensions, commodity price volatility, and fiscal constraints pose upside and downside risks to inflation and growth.
Key takeaway: OM’s recent rate cut signals a shift to accommodative policy amid slowing inflation and growth, but external risks warrant cautious monitoring.
This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.
The interest rate cut to 4.50% in October 2025 compares to 4.75% last month and a 12-month average of 5.00%. This downward trend reflects a clear easing cycle over the past year, with three consecutive cuts since September 2024.
The 25 basis point reduction is consistent with the central bank’s response to slowing inflation and growth moderation.