UAE, GCC countries to see an extended period of higher interest rates

UAE, GCC countries to see an extended period of higher interest rates

The UAE and other countries of the Gulf Corporation Council (GCC) will experience an extended period of higher interest rates, say economists.

Gulf central banks have been raising interest rates in line with the Federal Reserve over the past couple of years as the US central bank tries to bring down inflation from a multi-decade high.

The UAE and other Gulf countries follow the Fed as their currencies are pegged to the US dollar. The Central Bank of the UAE (CBUAE) decided to maintain the Base Rate applicable to the Overnight Deposit Facility (ODF) at 5.40 per cent, effective from Thursday, September 21.

The UAE Central Bank raised the rates last time on July 26 by 25 basis points from 5.15 per cent to 5.40 per cent following the US Federal Reserve Board’s announcement to increase the Interest on Reserve Balances (IORB) by 25 basis points.

Oxford Economics said the Fed recently paused its rate hiking cycle, offering respite to the GCC countries whose rates have reached the highest level in over 20 years.

“However, inflation is rising once more, so we cannot rule out another Fed rate hike before the end of 2023, which could force the dollar-pegged nations to adapt accordingly until a