Most central banks across the Gulf raised key interest rates on Wednesday after the Federal Reserve increased its target interest rate by a quarter of a percentage point, although Qatar opted to hold.
The Saudi Central Bank, raised its repurchase agreement (repo) rate by a quarter-point to 5.25% and its reverse repo rate by a similar margin to 4.75%. While the UAE said its base rate would increase to 4.65% effective on Thursday. Bahrain also lifted its key interest rates by the same.
Inflation in GCC economies remained lower than the global average, benefitting from fixed exchange rates and fuel subsidies, according to the World Bank. Global inflation is forecast to fall to 6.6% in 2023 and 4.3% in 2024, according to the IMF's latest forecast.
Why it matters
Gulf central banks raised interest rates several times throughout 2022 in keeping with the Federal Reserve. Qatar’s decision to not raise rates could indicate the Gulf state has a relatively bullish outlook on inflation. MENA economies — which expanded by an estimated 5.7% in 2022, their highest in a decade, owing to a rise in energy revenue — are projected to decelerate to 3.5% in 2023 and to 2.7% in 2024, according to the World Bank.