GCC central banks raise interest rates in line with US Fed’s move to tackle inflation

GCC central banks raise interest rates in line with US Fed’s move to tackle inflation

RIYADH: Gulf central banks on Wednesday raised their main interest rates by a quarter percentage point in lockstep with the US Federal Reserve as it began a monetary tightening cycle in a newly aggressive stance against rising inflation. The six Arab nations of the Gulf Cooperation Council typically follow the Fed’s lead on interest rates as their currencies are pegged to the US dollar, except Kuwait’s, which is pegged to a basket of currencies including the dollar. “If policymakers in the Gulf did not allow interest rates to follow those in the US, capital would flow out of their economies and this would put downwards pressure on their currencies,” James Swanston, Middle East and North Africa economist at Capital Economics, wrote in a research note. The Saudi Central Bank, or SAMA, increased both its repo and reverse repo rates by 25 basis points (bps) each to 1.25 percent and 0.75 percent, respectively. “Policy rate adjustments are consistent with SAMA’s objectives of maintaining monetary stability and supporting the stability of the financial sector in the evolving domestic and international monetary conditions,” SAMA said in a statement. The Central Bank of the UAE raised its base rate, which is on its overnight