CBUAE, Gulf central banks raise interest rates following US Fed rate hike

The central banks of UAE, Saudi Arabia, Kuwait, Qatar and Bahrain have raised their interest rates in response to a hike in the US Fed’s benchmark rate on September 21.

The US Federal Reserve raised its benchmark interest rate by three-quarters of a percentage point to a range of 3-3.25 per cent on Wednesday. The rate increase was the fifth of the year and the third consecutive three-quarter point hike.

Read Chair Powell’s full opening statement from the #FOMC press conference (PDF): https://t.co/ZNA1xGtjax pic.twitter.com/d9UjN8rAh7

— Federal Reserve (@federalreserve) September 21, 2022

According to the state news agency, WAM, the Central Bank of the UAE (CBUAE) raised the base rate applicable to the overnight deposit facility (ODF) by 75 basis points (bps) – from 2.4 to 3.15 per cent, effective from September 22.

The CBUAE also has decided to maintain the rate applicable to borrowing short-term liquidity from the CBUAE through all standing credit facilities at 50 bps above the base rate.

The base rate, which is anchored to the US Federal Reserve’s IORB (interest rate on reserve balances), signals the general stance of the CBUAE’s monetary policy. It also provides an effective interest rate floor for overnight money market rates.

The Saudi Central Bank (SAMA) hiked its reverse repo rate by 75 bps to 325 bps from 250 bps. It also increased its repo rate to 375 bps (3.75 per cent) from 300 bps. The central bank follows the interest rate moves of the US Federal Reserve due to the Riyal-US dollar peg.

In response to the Fed hike rate, the Central Bank of Kuwait has said it’s increasing its discount rate by 25 bps to 3 per cent as of Thursday, September 22.

CBK Raises Discount Rate by a Quarter Percentage Point to 3.00%https://t.co/wEiDVWLVzv pic.twitter.com/rUhC0h9quu

— بنك الكويت المركزي | CBK (@CentralBank_KW) September 21, 2022

Qatar Central Bank has raised its deposit rate by 75 bps to 3.75 per cent as of September 22.

قرار لجنة السياسة النقدية الخاص بأدوات السياسة النقدية – سبتمبر 2022#مصرف_قطر_المركزي#أسعار_الفائدة pic.twitter.com/B0Tn46vH71

— مصرف قطر المركزي (@QCBQATAR) September 21, 2022

The Central Bank of Bahrain has also decided to raise its key policy interest rate in light of these developments. The central bank has raised its key policy interest rate on the one-week deposit facility from 3.25 to 4 per cent.

The bank has also decided to raise the overnight deposit rate from 3 to 3.75 per cent, the four-week deposit rate from 4 to 4.75 per cent and the lending rates from 4.50 to 5.25 per cent.

CBB Raises Key Interest Rate by 75 basis points https://t.co/CAhmrZyjVK pic.twitter.com/7WOGGvuj1i

— Central Bank of Bahrain (@CBB_News) September 21, 2022