The central banks of the UAE, Saudi Arabia, Bahrain and Qatar raised their benchmark borrowing rates after the US Federal Reserve increased its key interest rate to tame inflation and restore price stability.
The Fed bumped up the policy rate for a third consecutive time this year by 25 basis points (bps) as the labour market remains tight, the unemployment rate is at a multi-decade low and the central bank continues to try to bring inflation down to its target range of 2 per cent after prices hit a four-decade last year.
Most central banks in the six-member GCC bloc follow the Fed’s policy rate moves due to their currencies being pegged to the US dollar, except for Kuwait which links its dinar to a basket of currencies.
The Saudi Central Bank, better known as Sama, raised its repurchase agreement (repo) rate by a quarter-point to 5.75 per cent and its reverse repo rate by a similar margin to 5.25 per cent.
The UAE Central Bank raised its benchmark borrowing rate raised its base rate for the overnight deposit facility by a quarter of a percentage point to 5.15 per cent from 4.9 per cent, effective from Thursday.
Meanwhile, the Central Bank of Bahrain also increased its key rate on one-week deposits by 25 bps to 6 per cent.
The Central Bank of Qatar raised its repo rate by a quarter of a percentage point to 5.75 per cent. It also increased its deposit rate by a similar margin pushing it to 5.5 per cent and the lending rate by 25 bps to 6 per cent.