GCC banks raise interest rates after Fed hike

Flags of the Gulf Cooperation Council countries

The central banks of Saudi Arabia, the UAE, Kuwait, Qatar and Bahrain hiked their benchmark interest rates following suit of the US Federal Reserve, which decided on May 4 to raise its key rate by 50 basis points (bps).

The Saudi Central Bank (SAMA) decided to lift its reverse repo rate from 75 bps to 125 bps and the repo rate to 175 bps from 125 bps.

The Central Bank of the UAE (CBUAE) also increased its base rate for the overnight deposit facility (ODF) by 50 bps, effective from today, May 5.

The CBUAE maintained the rate applicable to borrowing short-term liquidity from the regulator through all standing credit facilities at 50 bps above the base rate.

The Central Bank of Kuwait (CBK) also hikes its discount rate by 25 bps to 2% from 1.75%, effective from today.

CBK governor Basel Al-Haroon said the decision reflects the regulator's "vigilant monitoring of domestic and international economic and geopolitical developments that resulted in all-time high global inflation rates, mainly driven by increased commodity and energy prices and continuous supply chain disruptions, which constitute a key source of imported inflation."

Qatar Central Bank (QCB) raised its repo rate by 50 bps to 1.75%. It also increased its deposit rate by 50 bps to 1.50% and the lending rate by 25 bps to 2.75%.

The Central Bank of Bahrain (CBB) increased its key policy interest rate on the one-week deposit facility by 50 bps to 1.75% from 1.25%. It also hiked the overnight deposit rate to 1.50% from 1%, the four-week deposit rate to 2.5% from 1.75% and the lending rates to 3% from 2.5%.

The Fed's move is the second this year after a smaller rise in March.

In April, Federal Reserve Chairman Jerome Powell said the central bank could raise the interest rate by 50 basis points in May to control inflation.

The US central bank raised the interest rate by 25 basis points in March as some investors started to cut their holdings of assets.