Gulf central banks raise key interest rates tracking the US Fed

Central banks in the GCC raised interest rates on Wednesday night in lockstep with the US Federal Reserve, which raised benchmark overnight interest rate by one quarter of a percentage point, taking the federal funds rate to a target range between 5% and 5.25%.

The Central Bank of UAE raised its base rate on overnight deposits by 25 basis points (bps) to 5.15% effective from Thursday, the state news agency said.

Most central banks in the GCC usually track the Fed's policy rate moves as their currencies are pegged to the US dollar. While the US monetary authority seeks to tackle stubborn inflation even as the economy seems to head towards recession, the situation is different in the GCC. The region which saw inflation averaging 3.6% in 2022, according to IMF estimates, is expected to see inflation soften further to 2.7% on average this year because of the previous rate hikes.

The Saudi Central Bank, known as SAMA, raised its repo and reverse repo rates by 25 bps to 5.75% and 5.25%, respectively.

Bahrain's central bank also lifted its key interest rates by 25 bps. Its one-week deposit facility rate was raised from 5.75% to 6% and the overnight deposit rate to 5.75%. The four-week deposit rate was raised to 6.75%, a statement from the bank said.

The central bank of Qatar also increased the lending and deposit rates by 25bps to 6% and 5.50%. The monetary authority also hiked the repo rate by 25bps to 5.70%.




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