Borrowers in UAE, Gulf face painful back-to-back rate hikes | Banking – Gulf News
UAE borrowers will face another sharp rise in interest rates from June as the US Federal Reserve prepares for a 50 basis point hike. This could be repeated in July as well.
The Fed’s May meeting minutes showed officials are resolved to raising interest rates aggressively to curb inflation despite fears the US may suffer a recession. The minutes show officials willing to lift Fed funds rate by 50 bps in June and July after May’s 50 bps hike.
“We expect Fed will raise (rates) to 2.75-3 per cent by early next year,” said Mansoor Mohiuddin, Chief Economist at Bank of Singapore. “We think it is too soon for Fed to shift from 50 bps to 25 bps hikes.”
The UAE and other GCC countries are likely to follow the Fed’s tightening cycle to maintain exchange rate stability due to the currencies’ peg to the dollar.
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