GCC central banks track US Fed move; hike key rates by 25bps

GCC central banks track US Fed move; hike key rates by 25bps

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 between 4.75% to 5%.

The Central Bank of UAE raised its base rate on overnight deposits by 25 basis points (bps) to 4.9% effective from Thursday, the state news agency said.

Most central banks in the GCC usually track the Federal Reserve's policy rate moves as their currencies are pegged to the US dollar. The region has seen inflation averaging 5-6% during 2022, higher than in more than a decade but much lower than in many western countries.

The Saudi Central Bank, known as SAMA, raised its repo and reverse repo rates by 25 bps to 5.50% and 5%, respectively.

Bahrain's central bank also lifted its key interest rates by 25 bps. Its one-week deposit facility rate was raised to 5.75% and the overnight deposit rate to 5.50%. The four-week deposit rate was raised to 6.50% from 6.25%.

The central bank of Qatar, which had maintained its rates in the previous cycle, on Wednesday increased the lending and deposit rates by 25bps to 5.75% and 5.25%. The monetary authority also hiked the repo rate by 25bps to 5.50%.