In line with the US Federal Reserve’s move of increasing the benchmark overnight interest rate by 0.25%, GCC central banks raised their interest rates on Wednesday night. The Federal Reserve’s decision took the federal funds rate between 4.75% to 5%.
The Central Bank of UAE responded by raising its base rate on overnight deposits by 25 bps to 4.9%, effective from Thursday, as stated by the state news agency. Most central banks in the GCC tend to follow the Federal Reserve’s policy rate changes as their currencies are pegged to the US dollar. Although the region experienced inflation averaging between 5% to 6% in 2022, which is higher than the past decade, it is still significantly lower than several western countries.
Additionally, the central banks of Saudi Arabia, Bahrain, and Qatar followed the UAE’s lead and raised their key interest rates by 25 bps. Saudi Arabia’s SAMA increased its repo and reverse repo rates to 5.50% and 5%, respectively. Bahrain raised its one-week deposit facility rate to 5.75%, the overnight deposit rate to 5.50%, and the four-week deposit rate to 6.50% from 6.25%.
Meanwhile, Qatar’s central bank increased its lending and deposit rates to 5.75% and 5.25%, respectively, and the repo rate to 5.50%, after keeping rates unchanged in the previous cycle.
