The Federal Open Market Committee (FOMC) has hiked its key interest rates by 75 basis points (bps) on Wednesday, to fight soaring inflation. Many GCC economies also matched the rate hike by increasing the lending rate by 75 bps.
The Central Bank of the UAE (CBUAE) has decided to raise the base rate applicable to the Overnight Deposit Facility (ODF) by 75 bps, effective from Thursday, 28 July 2022. Similarly, Kuwait, Bahrain and Qatar also hiked lending rates.
"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 basis points above the Base Rate. The Base Rate, which is anchored to the US Federal Reserve’s IORB, signals the general stance of the CBUAE’s monetary policy. It also provides an effective interest rate floor for overnight money market rate," the apex bank said in a statement.
The Central Bank of Bahrain's key policy interest rate on the one-week deposit facility is raised from 2.50% to 3.25%. "The CBB has also decided to raise the overnight deposit rate from 2.25% to 3.00%, the four-week deposit rate from 3.25% to 4.00% and the lending rates from 3.75% to 4.50%," according to a statement from the cental bank.
The Central Bank of Kuwait (CBK) will raise the discount rate by a quarter percentage point from 2.25% to 2.50% from Thursday, July 28.
According to CBK Governor Basel Al Haroon, the central bank will also change the rates of monetary policy instruments by varying percentages for the entire interest rate yield curve including repurchases, CBK bonds, Tawarruq, term deposits, direct intervention instruments as well as public debt instruments.
The Central Bank of Qatar also increased its main deposit rate by 75 bps to 3% . "The repo rate was raised by 75 bps to 3.25 per cent and lifted the lending rate by 50 bps to 3.75," according to a statement.
Fed Chairman Jerome Powell's rate hike decision is considered to be the largest back-to-back rate increase in decades. The annual inflation rate in the US accelerated to 9.1% in June of 2022, the highest since November of 1981, from 8.6% in May and above market forecasts of 8.8%. Investors are looking forward to tomorrow's US GDP numbers, which could give an indication whether the economy has slipped into a recession.
(Writing by Seban Scaria; editing by Daniel Luiz)