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Image source: WAM
Central banks in Qatar and the United Arab Emirates left their key interest rates unchanged after US Federal Reserve officials agreed to keep rates on hold after 10 consecutive hikes. However, the Fed said borrowing costs could rise another half a percentage point by the end of the year.
The Fed’s move to keep its benchmark interest rate at around 5.1%, the highest in 16 years, suggests the top bank believes higher borrowing costs are making some progress in slowing inflation.
GCC Monetary Policy
Meanwhile, since the currencies of the Gulf countries — the UAE dirham, Qatari riyal, Saudi riyal and Bahraini dinar — are pegged to the dollar, GCC central banks typically adjust interest rates in tandem with the Fed.
CBUAE says it will keep base rate on its overnight deposit facility unchanged 5.15%t, effective Thursday, June 15, 2023.The central bank also decided to maintain the interest rate applicable to borrowing short-term liquidity from the central bank CBUAE 50 basis points above the base rate through all standing credit facilities.
The benchmark interest rate is based on the Federal Reserve’s reserve balance rate and indicates the overall stance of the CBUAE’s monetary policy. The central bank also emphasized that the benchmark rate provides an effective interest rate floor for the country’s overnight money market rates.
CBUAE keeps benchmark interest rate at 5.15%#WamNews https://t.co/uHMz1KdEXq pic.twitter.com/2Rqqi7wuJR
— WAM English (@WAMNEWS_ENG) June 14, 2023
Qatar Central Bank (QCB) said it maintained the current rate after the top lender raised the deposit rate to 5.50 percent, the lending rate to 6 percent and the repo rate to 5.75 percent on May 4. Address conditions that may affect all aspects of financial stability,” the central bank said in a statement.
read: Most GCC central banks follow Fed’s move with rate hikes
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