CBB raises key interest rate by 25 basis points

The Central Bank of Bahrain (CBB) has raised its key policy interest rate by a quarter of a percentage point yesterday.

Bahrain’s banking regulator said the policy interest rate on the one-week deposit facility is raised from 6pc to 6.25pc.

The CBB has also decided to raise the overnight deposit rate from 5.75pc to 6pc, while maintaining the four-week deposit rate at 6.75pc and the lending rates at 7pc.

Adding that it continues to monitor global and local market developments closely, the CBB said it would take any further necessary actions to maintain monetary and financial stability in the kingdom.

The decision follows the US Federal Reserve raising interest rates by 25 basis points, citing still elevated inflation as a rationale for what is now the highest US central bank policy rate in 16 years.

The rate hike, the Fed’s 11th in its last 12 meetings, set the benchmark overnight interest rate in the 5.25pc-5.50pc range, and the accompanying policy statement left the door open to another increase.

“The (Federal Open Market) Committee will continue to assess additional information and its implications for monetary policy,” the Fed said in language that was little changed from its June statement and left the central bank’s policy options open as it searches for a stopping point to the current tightening cycle.


As it stated in June, the Fed said it would watch incoming data and study the impact of its rate hikes on the economy “in determining the extent of additional policy firming that may be appropriate” to reach its 2pc inflation target.

Though inflation data since the Fed’s meeting in June has been weaker than expected, policymakers have been reluctant to alter their hawkish stance until there is more progress in reducing price pressures.

Key measures of inflation remain more than double the Fed’s target, and the economy by many measures, including a low 3.6pc unemployment rate, continues to outperform expectations given the rapid increase in interest rates.

Job gains remain “robust,” the Fed said, while it described the economy as growing at a “moderate” pace, a slight upgrade from the “modest” pace seen as of the June meeting. The US government today is expected to report the economy grew at a 1.8pc annual pace in the second quarter, according to economists polled by Reuters.

However, with about eight weeks until the next Fed meeting, a longer-than-usual interlude, continued moderation in the pace of price increases could make this the last rate hike in a process that began with a cautious quarter-percentage-point increase in March of 2022 before accelerating into the most rapid monetary tightening since the 1980s.

In the most recent economic projections from Fed policymakers, 12 of 18 officials expected at least one more quarter-percentage-point increase would be needed by the end of this year.


Source: https://www.gdnonline.com/Details/1287412/CBB-raises-key-interest-rate-by-25-basis-points


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