GCC Central Banks Increase Interest Rates Conforming With the US Fed Reserve

GCC Central Banks Increase Interest Rates Conforming With the US Fed Reserve

The central banks of the UAE, Saudi Arabia and Bahrain raised their benchmark borrowing rates after the US Federal Reserve increased the policy rate by 25 basis points.

A majority of central banks in the GCC follow the Fed’s policy rate moves due to their currencies being pegged to the US dollar. Kuwait is an exception as its dinar is linked to a basket of currencies.

The Saudi Central Bank, or Sama, raised its repurchase agreement (repo) rate by a quarter-point to 5.25 per cent and its reverse repo rate by a similar margin to 4.75 per cent.

The UAE Central Bank raised its base rate for the overnight deposit facility (ODF) by a quarter of a percentage point to 4.65 per cent, from 4.4 per cent, from Thursday.

The rate applicable to borrowing short-term liquidity from the regulator stays constant through all standing credit facilities at 50 bps above the base rate.

The Central Bank of Bahrain increased its key rate on one-week deposits by 25 bps to to 5.5 per cent “in light of the development of the international financial market and … to ensure the smooth functioning of the money markets in the kingdom”.

The Bahraini regulator also raised its interest rate on