After the Fed’s action, most Gulf central banks increase interest rates

After the Federal Reserve increased its key policy rate by three-quarters of a percentage point for the fourth consecutive time on Wednesday, the majority of Gulf states announced that they would be raising their key interest rates as well.

 

Although the U.S. central bank’s decision was driven by its aim to reduce the country’s stubbornly high inflation rate, it will also influence monetary policy in the Gulf as the majority of the region’s currencies are pegged to the dollar.

 

The two biggest economies in the area, Saudi Arabia and the United Arab Emirates, both raised rates by 75 basis points. The repo and reverse repo rates at the Saudi central bank, also known as SAMA, were increased to 4% and 4.5%, respectively. On Thursday, the base rate in the UAE will increase to 3.9%.

 

Qatar boosted rates by between 50 and 75 basis points, while Bahrain likewise lifted its primary rate by 75 basis points. No rate changes were immediately made public by Kuwait or Oman.

 

There hasn’t been much of an impact of increased interest rates among Gulf oil exporters in 2022.