CAIRO – Gulf central banks hiked their main interest rates Wednesday as the US Federal Reserve raised its target policy rate by 50 basis points in the face of inflation at highs not seen in decades.
All Gulf countries have their currencies pegged to the US dollar, except Kuwait, which pegs the Kuwaiti dinar to a basket of currencies that includes the dollar, Reuters reported.
The Central Bank of Kuwait said it increased its discount rate by 25 basis points (bps) to 2%, in a move less hawkish than the Fed’s. It said it also changed other rates, including on CBK bonds, term deposits and direct intervention instruments, without specifying by how much.
The central banks of the United Arab Emirates and Bahrain both raised their key rates by 50 bps. The CBUAE said its base rate would increase by 50 basis points, which would take it to 2.25%, effective from Thursday.
The bank said it would maintain the rate on borrowing short-term liquidity from the CBUAE through all standing credit facilities at 50 bps above the base rate.
The Central Bank of Bahrain said it raised its key policy rate, on its one-week deposit facility, by 50 bps to 1.75%, in lockstep with the Fed’s hike.
The CBB also increased its overnight deposit rate and lending rates by 50 bps to 1.5% and 3%, respectively, and its four-week deposit rate was increased by 75 bps to 2.5%.
Central banks in Saudi Arabia, Qatar and Oman – the other members of the Gulf Cooperation Council – are widely expected to follow with similar moves.
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