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Wednesday, November 29, 2023

Gulf banks raise interest rates following US Federal Reserve hike

UAE, Saudi, Bahrain and Qatar Central banks raise interest rates after Fed hike in US

The central banks of UAE, Saudi Arabia, Bahrain, and Qatar have raised their interest rates following the Federal Reserve’s recent decision to hike interest rates in the US.

The central banks of Saudi Arabia, Bahrain and Qatar raised their benchmark borrowing rates after the US Federal Reserve raised its key interest rate by 25 basis points tonight.

The Saudi Central Bank raised the rate of Repurchase Agreement (Repo) by 25 basis points to 5.50 percent, and the rate of Reverse Repurchase Agreement (Reverse Repo) by 25 basis points to 5.00 percent.

In Bahrain, the one-week deposit facility rate increased to 5.75% from 5.5% and the overnight deposit rate was raised to 5.5% from 5.25%, Bahrain’s Central Bank tweeted.

The Central Bank of Qatar likewise raised its interest rates by 25 basis points effective on Thursday, hiking deposit, lending and repo rates by 25 bps to 5.25%, 5.75% and 5.5%, respectively.

Earlier, the Central Bank of the UAE raised the base rate applicable to the Overnight Deposit Facility (ODF) by 25 basis points – from 4.65% to 4.90%, effective from Thursday, 23 March 2023.

The central banks of these countries have increased interest rates in response to the US Federal Reserve’s decision to raise its key interest rates by 25 basis points in December 2021. The move was aimed at keeping inflation under control amid rising prices and supply chain disruptions caused by the COVID-19 pandemic.

Higher interest rates usually make borrowing more expensive, which can slow down economic growth, but they can also help to keep inflation under control. By raising interest rates, central banks in the UAE, Saudi Arabia, Bahrain, and Qatar are trying to curb inflationary pressures and stabilize their economies.

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