Bahrain, Gulf central banks, raise interest rates after Fed's move

TDT | Manama                

The Daily Tribune – www.newsofbahrain.com

Bahrain and most of its Gulf Cooperation Council neighbours yesterday raised their key interest rates after the Federal Reserve raised its key policy rate by three-quarters of a percentage point for the fourth straight time.

While the US central bank's policy decision was motivated by its desire to lower stubbornly high inflation in the United States, it also will guide Gulf monetary policy as most of the regional currencies are pegged to the dollar.

The Federal Reserve raised interest rates as it continued to battle the worst outbreak of inflation in 40 years but signalled future increases could be in smaller steps to account for the "cumulative tightening of monetary policy" it has enacted so far.

Fed Chair Jerome Powell said that change in pace could come as soon as the central bank's next meeting in December, but he also cautioned that there remains extensive uncertainty about how high rates will need to go and they could well end up being higher than policymakers had estimated at their last meeting in September.

Bahrain raises rate by 75 basis pts

Bahrain raised its main rate by 75 basis points, as Saudi Arabia and the United Arab Emirates, the region's two largest economies, also increased rates by 75 basis points.

The Saudi central bank, also known as SAMA, lifted its repo and reverse repo rates to 4.5% and 4%, respectively. The UAE's base rate will rise to 3.9%, effective today. The Central Bank of Bahrain, in a statement said, they are raising the rate to ensure the smooth functioning of the money markets in the Kingdom of Bahrain.

Accordingly, CBB’s key policy interest rate on the one-week deposit facility is raised from 4.00% to 4.75%. The CBB also raised its overnight deposit rate from 3.75% to 4.50%, four-week deposit rate from 4.75% to 5.50% and lending rates from 5.25% to 6.00%.

The top bank said it continues to monitor global and local market developments closely to take further necessary actions to maintain monetary and financial stability in the Kingdom. Qatar increased rates by between 50 and 75 basis points. Kuwait and Oman did not immediately announce any rate changes.