- The central banks of the UAE, Saudi Arabia, Bahrain, Kuwait, Oman, and Qatar have raised their benchmark borrowing rates. This move comes after the US Federal Reserve increased its key interest rate for the 11th time since March 2022, reaching a 22-year high. The Fed aims to control inflation and restore price stability, having raised rates by a total of 525 basis points since March 2022, with the latest increase setting the federal funds rate between 5.25% and 5.5%.
- Despite inflation slowing more than expected in June, the Fed remains concerned about wage growth, which can be a significant driver of inflation. Most central banks in the GCC countries follow the Fed's policy rate moves as their currencies are pegged to the US dollar.
Why it matters
By raising their benchmark rates, these countries aim to align their monetary policies with the US and maintain the stability of their currencies, which are tied to the US dollar. This move reflects the interconnectedness of global financial markets and highlights the importance of considering the actions of major central banks like the Federal Reserve when making monetary policy decisions in other regions.
