RIYADH: Central banks in the Gulf Cooperation Council region have seen their interest rates remain unchanged after the US Federal Reserve opted to keep its benchmark level at between 5.25 percent and 5.50 percent.
As most currencies in the Gulf are pegged to the US dollar, monetary policy follows the decisions taken in Washington, with policymakers opting to lock the rate at the level it has been since July.
The freeze comes as rate setters balance trying to control inflation with supporting the economy, having previously hiked interest rates 11 times in succession in a bid to put the brakes on rising prices.
The decision means the Saudi Central Bank, also known as SAMA, will keep its repo rates at the current 6 percent level.
Repo rates represent a form of short-term borrowing, primarily involving government securities.
This decision underscores the close economic ties and financial dynamics between the GCC countries and the global economic landscape, particularly the US.
Most other Gulf central banks kept their interest rates unchanged.
The Central Bank of Oman maintained the repo rates for local banks at 6 percent, as reported by the Oman News Agency.
This decision is consistent with the apex bank’s monetary policy, which is focused on preserving the fixed exchange rate system for the Omani riyal.
The Central Bank of the UAE announced that it will keep the base rate on overnight deposit facilities at 5.40 percent, the Emirates News Agency, also known as WAM, reported.
This rate, linked to the US Federal Reserve’s interest on reserve balances, reflects the general stance of the CBUAE’s monetary policy and serves as an effective interest rate floor for overnight money market rates in the UAE.
Additionally, the CBUAE has also decided to keep the rate applicable to short-term liquidity borrowing from banks through existing credit facilities at 50 basis points above the base rate.
The central banks of Qatar, Kuwait, and Bahrain also followed the Fed’s decision.
After almost 20 months of aggressive tightening of monetary policy, Fed Chair Jerome Powell said that there is willingness to raise rates again if progress on inflation lingers.
He acknowledged that inflation remains well above the central bank’s 2 percent target, and it is uncertain whether overall financial conditions are restrictive enough to curb inflation.