GCC central banks raise interest rates in lockstep with the US Fed

GCC central banks raise interest rates in lockstep with the US Fed

Image courtesy: Tamer Soliman/ Getty Images

Central banks in the GCC have increased their key interest rates after the US Federal Reserve (Fed) delivered its 11th rate hike, reinforcing its fight against high inflation.

The Fed signalled that borrowing costs will likely rise by another quarter percentage point after delivering the highest US central bank policy rate in 22 years. “The Committee will continue to assess additional information and its implications for monetary policy,” the US central bank’s Federal Open Market Committee said in a statement.

The midpoint of that target range would be the highest level for the benchmark rate since early 2001.

Monetary policy in the GCC

Meanwhile, GCC central banks normally change their interest rates in lockstep with the Fed as Gulf countries’ currencies – the UAE dirham, Qatari riyal, Saudi riyal, Omani rial and Bahraini dinar – are pegged to the dollar.

The Central Bank of the UAE (CBUAE) said it would raise the base rate on its overnight deposit facility by 25 basis points (bps) to 5.40 per cent, from 5.15 per cent, effective Thursday. “This decision was taken following the Fed’s announcement on July, 26th to increase the interest on reserve balances (IORB) by 25 bps,” the UAE