GCC may not follow US Fed to avoid ‘stifling’ non-oil growth

GCC may not follow US Fed to avoid ‘stifling’ non-oil growth

Kuwait - The Economist Intelligence Unit reported that some of the wealthiest countries in the Gulf Cooperation Council could decide not to follow the US Federal Reserve which has raised interest rates, citing Kuwait in particular because it does not want to stifle non-oil growth in the country, reports Al-Rai daily.

The EIU pointed out that this option is not available to Bahrain due to financial pressures on it, stressing in general that the expected tightening of interest rates in the region will constitute an obstacle to its growth.

EIU sources indicated that pegging the Gulf Cooperation Council countries currencies to the dollar was beneficial because it provided them with a credible basis for their monetary policies, noting that this link made the Gulf countries follow the US Fed example in its interest rates policy, while the Kuwaiti dinar exchange rate is linked to a basket of currencies dominated by the dollar.

Consistent

The unit clarified that most of the GCC countries raised interest rates in a manner that is fully consistent with the US increases, which have totaled 225 basis points so far, with the expectation of more increases in the context of the Federal Reserve’s efforts to reduce the infl ation rate