UAE, Qatar central banks keep interest rates steady, tracking US Fed move

The central banks of Qatar and the UAE have kept their key interest rates unchanged after US Federal Reserve (Fed) officials agreed to hold interest rates steady, after 10 consecutive increases. However, the Fed signalled that borrowing costs will likely rise by another half of a percentage point by the end of this year.

The move by the Fed to leave its benchmark rate at about 5.1 per cent, its highest level in 16 years, suggests that the apex lender believes that higher borrowing costs have made some progress in slowing the rate of inflation.

Monetary policy in the GCC

Meanwhile, GCC central banks normally change their interest rates in lockstep with the Fed as Gulf countries’ currencies – the UAE dirham, Qatari riyal, Saudi riyal and Bahraini dinar – are pegged to the dollar.

CBUAE said it would leave the base rate on its overnight deposit facility unchanged at 5.15 per cent, effective Thursday, June 15, 2023. The central bank also decided to maintain the rate applicable to borrowing short-term liquidity from the CBUAE through all standing credit facilities at 50 basis points above the base rate.

The base rate, which is anchored to the Fed’s Interest on Reserve Balances, signals the general stance of the CBUAE’s monetary policy. The central bank also highlighted that the base rate provides an effective interest rate floor for overnight money market rates in the country.

CBUAE maintains Base Rate at 5.15%#WamNews https://t.co/uHMz1KdEXq pic.twitter.com/2Rqqi7wuJR

— WAM English (@WAMNEWS_ENG) June 14, 2023

Qatar Central Bank (QCB) said it maintains current interest rates after the apex lender hiked its deposit rate to 5.50 per cent, the lending rate to 6 per cent and the repo rate to 5.75 per cent on May 4. “QCB will continue to access the country’s economic conditions to address all the aspects that may affect the financial stability,” the central bank said in a statement.

Central Bank of Oman kept its repo rate unchanged at 5.75 per cent. The Sultanate’s key policy rate remained at the range of 5 per cent and 5.25 per cent.

Read: Most GCC central banks raise interest rates tracking US Fed move