GCC central bank hikes rates after Fed raises rates by 75bps for fourth straight

The central banks of the United Arab Emirates, Saudi Arabia, Bahrain and Qatar in Fed The key rate was raised to 6 for the sixth time this year fight inflationat historic levels and restoring price stability.

Fed Wednesday Policy rate hike for the fourth time in a row 75 basis points Because it aims to bring inflation down to the 2% target range.

The Fed’s latest move has put the Federal Open Market Committee’s short-term interest rate between 3.75% and 4%, the highest level in 14 years.

The US headline consumer price index (CPI) rose 0.4% in September, up 8.2% from a year earlier.

The core CPI, which excludes food and energy, rose 6.6 percent from a year earlier, the highest level since 1982, according to the Labor Department.

The world’s largest economy has returned to growth after two straight quarters of declines in output, but recession fears loom and job creation continues at a rapid pace, with total job openings outstripping the number of unemployed Americans.

Fed criticized for slow response to rising prices and lagging behind inflation curve, doubling as interest rates rise rapidly.

But the Federal Open Market Committee signaled on Wednesday that it may be preparing to reduce the rate hikes.

Fed officials said they would take into account “the cumulative tightening of monetary policy, the lag with which monetary policy affects economic activity and inflation, and economic and financial developments” when making future interest rate decisions.

Chairman of the Federal Reserve Jerome Powell It said it has not yet made a decision on whether the December meeting will raise interest rates by 75 basis points for a fifth straight time, but believes it is “premature” to consider a pause.

Most central banks in the GCC follow the Fed’s policy rate changes because their currencies are pegged to the U.S. dollar.

This Central Bank of Saudi ArabiaSama is known to have raised its repurchase agreement (repo) rate by three-quarters of a percentage point to 4.5% and its reverse repo rate by a similar amount to 4%.

The regulator said on its website that the move was “consistent with its objective of maintaining monetary and financial stability.”

yearly inflation in the kingdomthe Arab world’s largest economy, edged up to 3.1%The t appears every September, driven by rising food and beverage prices and rising transportation costs.

Inflation rose slightly from the 3 percent increase recorded in September, according to Saudi Arabia’s General Statistics Authority (Gastat).

Saudi ArabiaThe economy grew by 8.6% in the third quarter of 2022, driven by higher oil prices and government reforms.Growth in the three months to the end of September was Up from 6.8% a year agoGastat said in its Quick Estimates report last week.

Saudi Arabia’s GDP projections 7.6% expansion According to the International Monetary Fund, output will rise this year after a 3.2% increase in 2021, while Saudi investment bank Jadwa Investment estimates output this year at 8.7% and the OECD forecasts a 9.9% increase.

The International Monetary Fund expects Saudi Arabia’s inflation rate to remain at 2.8% in 2022 as its central bank tightens monetary policy in line with the Federal Reserve.

Globally, the fund forecasts inflation to hit 5.7% in advanced economies and 8.7% in emerging market and developing economies this year.

Central Bank of the United Arab Emirates also increased Cut the benchmark interest rate on the Overnight Deposit Facility (ODF) by three-quarters of a percentage point.

It maintains rates applicable to borrowing short-term liquidity from regulators through all standing credit facilities The regulator said on Wednesday it was 50 basis points above the benchmark rate.

The benchmark rate, linked to the Federal Reserve’s Interest on Reserve Balances (IORB), marks the general stance of the UAE Central Bank’s monetary policy and provides an effective lower bound on overnight money market rates.

Inflation in the UAE Relatively low compared to the rest of the world. The CPI reading rose 3.4% in the first quarter of 2022, compared with 0.6% and 2.3% in the third and fourth quarters of 2021.

Inflation in the UAE is expected to reach 5.6% in 2022, according to the UAE Central Bank.

This Central Bank of Kuwait keep its Policy rate unchanged Amid lower inflation, it fell to 3.19% in September after hitting a record 4.71% in April.

The Kuwaiti regulator said it “continuously monitors all international economic, monetary and geopolitical developments and their impact on global economic conditions”.

“In light of these developments and their implications, and based on the requirements and conditions of the unique nature of each economy, including our national economy, the Central Bank affirms that the available local economic and financial data and information confirm the continued soundness of the currency and resilience and financial stability in Kuwait,” it said on its website.

This Central Bank of Bahrain It raised its key interest rate on one-cycle deposits by 75 basis points to 4.75% “in view of developments in international financial markets”.

The Bahraini regulator also raised the overnight deposit rate to 4.5%, the four-week deposit rate to 5.5% and the lending rate to 6%.

“The CBB will continue to monitor developments in global and local markets closely with a view to taking any further action necessary to maintain the Kingdom’s monetary and financial stability,” it says.

This Qatar Central Bank It also raised the repo rate by 75 basis points to 4.75%. It raised the deposit rate by three-quarters of a percentage point to 4.5%, and the lending rate similarly increased by 5%.

last month, International Monetary Fund The global cost of living crisis has warned of a global cost of living crisis as the world economy continues to be reeling from the war in Ukraine, soaring inflation and a slowdown in China.

After growing 6% in 2021, the fund maintained its global economic forecast for this year at 3.2%, but lowered its forecast for 2023 to 2.7%, 0.2 percentage points lower than its July forecast.

A stronger dollar has pushed up global import prices and food costs, and rising inflation has prompted central banks around the world to raise interest rates as they tighten monetary policy to restore price stability.

Soaring oil and gas prices have also added to already rising inflation.

Brent, the benchmark for more than two-thirds of the world’s crude oil, rose below $140 a barrel in March. It is down about 30% from its June high and is trading above $90 a barrel.

The impact on economic growth of higher energy prices and lower consumer purchasing power also hit U.S. stocks, sending the market into a bear market.

This Russia-Ukraine conflict Adding to the coronavirus-induced economic slowdown, upending commodity markets and disrupting global trade, will keep food and energy prices at “all-time highs” until 2024, World Bank May said.

Updated: November 3, 2022 at 10:12 am