September 23, 2022 banking

Gulf central banks raise key rates after Fed hike


The central banks of Saudi Arabia, UAE, Kuwait, Qatar and Bahrain have decided to raise their interest rates, tracking a hike in the US Fed's benchmark rate.

The move came as the US Federal Reserve raised its benchmark interest rate by 75 basis points to a range of 3%-3.25% on Wednesday - the biggest increase since 1994.

The rate increase, announced Wednesday at the end of the Fed’s two-day policy meeting, was the fifth of the year and the third consecutive three-quarter point hike. With few signs that its actions are working yet, the Fed has ramped up its moves to cool demand and keep prices from rising.

The Central Bank of the UAE (CBUAE) earlier yesterday decided to raise the Base Rate applicable to the Overnight Deposit Facility (ODF) by 75 basis points – from 2.4% to 3.15%, effective from Thursday, 22 September 2022.

The Saudi Central Bank decided to raise the rate of “repo” agreements by 75 basis points to 3.75 percent, and the rate of “reverse repo” agreements by 75 basis points to 3.25 percent, in line with the bank’s goals in maintaining monetary and financial stability in light of global developments, said a statement.

The Central Bank of Bahrain (CBB) decided to raise its key policy interest rate on the one-week deposit facility from 3.25% to 4%.

The move is in light of the developments at international financial markets and the continuous measures taken by the CBB to ensure the smooth functioning of the money markets in Bahrain, said a CBB statement.

The CBB has also decided to raise the overnight deposit rate from 3% to 3.75%, the four-week deposit rate from 4% to 4.75% and the lending rates from 4.5% to 5.25%.

The CBB continues to monitor global and local market developments closely in order to take any further necessary actions to maintain monetary and financial stability in the kingdom, it said.

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