Gulf nations push up interest rates after Fed move

Added 16th June 2017

Saudi Arabia and the UAE, along with Qatar, Bahrain and Jordan have raised interest rates in line with this week’s decision by the US central bank to hike its Federal funds rate by 25 basis points to 1.25%.

Gulf nations push up interest rates after Fed move

The Central Bank of Kuwait was the only member of the six-nation Gulf Cooperation Council (GCC) not to follow the Federal Reserve having followed the December 2015, December 2016 and March 2017 Fed hike.

While the Central Bank of Oman has remained on hold after the Fed move but its key policy rate - the repo rate – has been rising gradually since August 2016.

Weak backdrop

Analysts said the higher interest rates, coming against a backdrop of slowing economic and credit growth are negative for the region.

“Higher rates this year would put further negative pressure on non-oil economic activity and business sentiment,“ analysts at Standard Chartered Bank said in a research note.

“Growth in credit to the private sector is already falling across the GCC, and would be expected to fall further under the weight of higher interest rates.  However, some of the impact from the rate rises would be offset by the weaker US dollar,” they said.  The dollar is down by around 5% this year against a basket of GCC currencies.

Rates creep higher

After the latest move the Saudi Arabian Monetary Authority (SAMA) implemented a 25bps increase in its reverse repo rate to 1.25% and maintained its repo rate at 2.00%.

The Central Bank of the UAE raised its rate on certificates of deposit by 25bps, as well as a 25bps increase in its repo rate to 1.5%.

The Central Bank of Bahrain (CBB) raised its key policy rate – the one-week deposit rate – by 25bps in response to the Fed move. The CBB also raised its three other policy rates by 25bps.

The Qatar Central Bank raised its QMR deposit rate by 25bps to 1.50%, while keeping its key policy rate (the lending rate) on hold.

Finally, the Central Bank of Jordan announced that all its policy rates would be increased by 25bps effective 18 June, 2017. This includes the 1-week repo rate which will rise to 3.75%.

Visitor's Comments Add your comment

Add Your Comment

We won't publish your address

About Author

Richard Hubbard

Group Editor

Richard Hubbard is the group editor at Last Word. He is responsible for the editorial content of International Adviser, Portfolio Adviser, Expert Investor and Fund Selector Asia. Richard previously worked for Thomson Reuters and has covered the financial services industry and investment themes from its offices in London, Singapore, Hong Kong and New York. Richard started his career at the Australian Financial Review in Sydney.

Features

Economics of ESG investing driving demand in Europe

Economics of ESG investing driving demand in Europe...

A growing number of institutional investors in Europe are embedding ESG analysis in their investment processes in response to regulatory pressure, consumer demand and a rising appetite for new sources...

Analysis

Profiles

Directories

Canada Life International Limited
Canada Life International...

Canada Life International Canada Life House,...

Tweets

Events

IA International Fund Links Forum 2017
IA International Fund Links Forum 2017

Thursday 14 September

The Langham, London

IA Future Advisory Forum Europe 2017
IA Future Advisory Forum Europe 2017

Thursday 28 September
The Waldorf Hilton, London

IA Best Practice Adviser Awards Europe 2017
IA Best Practice Adviser Awards Europe 2017

Thursday 28 September
The Waldorf Hilton, London

IA Best Practice Adviser Awards South Africa 2017
IA Best Practice Adviser Awards South Africa 2017

Thursday 5 October
The Vineyard Hotel, Cape Town

Sponsored Content

Investment Strategy

OTHER STORIES FROM LAST WORD...