Hours after the US Federal Reserve hiked its key interest rates by 75 basis points (bps) on Wednesday, the GCC countries followed the suit and increased their rates by the same margin.
While the Federal Reserve’s aggressive step was aimed at combating the soaring inflation in the country, the regional economies followed the US moves as their currencies are pegged to the dollar.
The United Arab Emirates
The Central Bank of the UAE (CBUAE) has decided to raise the Base Rate applicable to the Overnight Deposit Facility (ODF) by 75 basis points, effective from Thursday, July 28, 2022.
The CBUAE has also decided to maintain the rate applicable to borrowing short-term liquidity from the CBUAE through all standing credit facilities at 50 basis points above the Base Rate.
The Base Rate, which is anchored to the US Federal Reserve’s IORB, signals the general stance of the CBUAE’s monetary policy. It also provides an effective interest rate floor for overnight money market rates.
Saudi Arabia
The Saudi Central Bank, meanwhile, has decided to raise the rate of repurchase “repo” agreements by 75 basis points (BPS) from 2.25 to 3.00 percent, as well as raising the rate of “reverse repo” agreements by 75 basis points (BPS) from 1.75 to 2.50 percent.
The Kingdom’s apex bank said that the move is in line with its goals to maintain monetary and financial stability in light of global developments.
Qatar
Qatar Central Bank (QCB) announced Wednesday it is raising the deposit rate 75 basis points to 3 percent. QCB also raised the lending rate 50 basis points to 3.75 percent.
The central bank sighted the evolving domestic and international macroeconomic developments as the reason behind the decision. It also increased the repo rate 75 basis points to 3.25 percent. (QNA)
Bahrain
The Central Bank of Bahrain (CBB) has raises its key policy interest rate on the one-week deposit facility by 75 basis points from 2.50 percent to 3.25 percent.
The CBB has also decided to raise the overnight deposit rate from 2.25 percent to 3.00 percent, the four-week deposit rate from 3.25 percent to 4.00 percent, and the lending rates from 3.75 percent to 4.50 percent.
Bahrain News Agency quoted the Central Bank of Bahrain as saying that it continues to monitor global and local market developments closely in order to take any further necessary actions to maintain monetary and financial stability in the Kingdom.
Kuwait
The Central Bank of Kuwait (CBK), the only one of the six Gulf Cooperation Council (GCC) countries that ties its currency to a basket rather than just the dollar, has raised its key discount rate by 25 basis points (bps) to 2.5 percent.
CBK Governor Basel Al Haroon said the Kuwait’a apex bank will also change the rates of monetary policy instruments by varying percentages for the entire interest rate yield curve including repurchases, CBK bonds, Tawarruq, term deposits, direct intervention instruments as well as public debt instruments.
The US Fed Chairman Jerome Powell’s rate hike decision is considered to be the largest back-to-back rate increase in decades.
The annual inflation rate in the US accelerated to 9.1 percent in June of 2022, the highest since November of 1981, from 8.6 percent in May and above market forecasts of 8.8 percent.