The Central Bank of the UAE (CBUAE) has raised the overnight deposit facility (ODF) base rate by 75 basis points, effective Thursday, June 16, 2022.
The move was made in response to the US Federal Reserve Board’s announcement on June 15, 2022, to raise the interest on reserve balances (IORB) by 75 basis points, according to the official news agency WAM.
However, the country’s central bank has decided to maintain the rate applicable to borrowing short-term liquidity from it 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 and provides an effective interest rate floor for overnight money market rates.
Meanwhile, central banks across the GCC have also raised their benchmark interest rates.
The Saudi Central Bank has decided to raise the repurchase agreement (repo) rate by 0.5 percent to 2.25 percent from a previous 1.75 percent, and the reverse repurchase agreement (reverse repo) rate by 0.5 percent to 1.75 percent from a previous 1.25 percent.
The Central Bank of Bahrain (CBB) has also decided to raise its key policy interest rate. Its key policy interest rate on the one-week deposit facility is raised from 1.75 per cent to 2.50 per cent. Meanwhile, CBB has also decided to raise the overnight deposit rate from 1.5 per cent to 2.25 per cent, the four-week deposit rate from 2.50 per cent to 3.25 per cent, and the lending rates from 3.00 per cent to 3.75 per cent.
Meanwhile, on June 16, 2022, Qatar Central Bank has decided to raise the QCB Deposit Rate (QCBDR) by 75 basis points to 2.25 per cent, raise the QCB lending rate (QCBLR) by 50 basis points to 3.25 per cent, and raise the QCB Repurchase Rate (QCB repo rate) by 75 basis points to 2.50 per cent.
The Central Bank of Kuwait (CBK) has also raised the discount rate by a quarter percentage point. The Governor of CBK Basel A. Al-Haroon, stated that the Board of Directors decided to raise the discount rate by 0.25 per cent from 2.00 per cent to 2.25 per cent effective June 16, 2022.
The CBK also decided to change the rates of monetary policy instruments by varying percentages for the entire interest rate yield curve, including repurchases (repo), CBK bonds and tawarruq, term deposits, direct intervention instruments, as well as public debt instruments.
