CBUAE, Gulf central banks raise interest rates following US Fed rate hike

CBUAE, Gulf central banks raise interest rates following US Fed rate hike

The central banks of UAE, Saudi Arabia, Kuwait, Qatar and Bahrain have raised their interest rates in response to a hike in the US Fed’s benchmark rate on September 21. The US Federal Reserve raised its benchmark interest rate by three-quarters of a percentage point to a range of 3-3.25 per cent on Wednesday, the biggest increase since 1994. The rate increase was the fifth of the year and the third consecutive three-quarter point hike. According to the state news agency, , the Central Bank of the UAE (CBUAE) raised the base rate applicable to the overnight deposit facility (ODF) by 75 basis points (bps) – from 2.4 to 3.15 per cent, effective from September 22. The CBUAE also has decided to maintain the rate applicable to borrowing short-term liquidity from the CBUAE through all standing credit facilities at 50 bps above the base rate. The base rate, which is anchored to the US Federal Reserve’s IORB (interest rate on reserve balances), signals the general stance of the CBUAE’s monetary policy. It also provides an effective interest rate floor for overnight money market rates. The Saudi Central Bank (SAMA) hiked its reverse repo rate by 75 bps to 325 bps