Gulf Banks raise interest rates following U.S. decision

CAIRO – 22 March 2018: A number of Central banks in the Gulf raised the interest rates by 25 basis points, following the decision of the U.S. Federal Reserve to increase the interest rates to 1.75 percent.

Central Banks of Kuwait, United Arab Emirates, Qatar and Bahrain raised their interest rates after the announcement of raising the rates in the United States of America, while Saudi Arabia raised its rates earlier due to expectations that the Fed would lift the rates.

The Fed met the Saudi expectations and lifted its benchmark overnight lending rate by a quarter of a percentage point, from 1.50 percent to 1.75 percent, in its first policy meeting under new Fed chief Jerome Powell, with a forecast of two more hikes during 2018.

Kuwait

Following the US Fed decision, the Central Bank of Kuwait raised its interest rates by the same percentage up to 3 percent from 2.75 percent.

The Kuwaiti bank clarified that the rise of the interest rates will be applied starting Thursday March 22.

Bahrain

In Bahrain, The Central Bank hiked its one-week deposits by a quarter point to 2 percent and the overnight deposits by 25 basis points to reach 1.75 percent.

For the one week deposits, the Bahraini bank upgraded the interest rates to 2.65 percent from 2.40 percent.

UAE and Qatar

Moreover, The United Arab Emirates lifted its benchmark rates; the repo rate was increased by 25 basis points to 2 percent; the certificates of deposit rates were raised by the same amount.

In Qatar, The Central bank bank took a decision to increase its deposit rate to 1.75 percent from 1.50 percent, with a raise of 25 basis points.


Saudi Arabia

The Saudi Arabian Monetary Authority (SAMA) preceded U.S. and the Gulf countries in raising its interest rates; the authority decided on March 15 to raise its two key interest rates by 25 basis points or 0.25 percent.

The Saudi repo rate was increased to 225 base points or 2.25 percent, from 200 point and the reverse repo reached 175 points or 1.75 percent, from 150 basis point.

Not the first Time

This is not the first time for the Gulf banks to follow the U.S. Fed decision of raising the interest rates.

In June 2016, three central Gulf banks; the UAE, Saudi Arabia and Bahrain banks, announced, following the fed's decision, to lift their interest rates by a quarter percentage point.

While the Central bank of Kuwait kept its interest rate at its levels.

Generally, The U.S. Fed raised the interest rates in 2017 three times to end the year by a rate of 1.5 percent.

Given, Oil exporters in the region such as Saudi Arabia and the United Arab Emirates, ties their currencies to the dollar under long-standing arrangements.

The dollar index declined Thursday 0.3 percent to 89.396.