The central banks of the Gulf countries, which peg their local currencies to the dollar, joined the US Federal Reserve, which raised interest rates today, Wednesday, by a quarter of a percentage point, to a range between 5.25% and 5.5%.

According to data issued this evening, Wednesday; The Central Bank of the UAE raised the base rate on the overnight deposit facility by 25 basis points, which is the same amount of increase approved by the central banks of Saudi Arabia, Qatar, Bahrain and Kuwait.

In detail:

  • The Central Bank of Kuwait raised the discount rate to 4.25%.
  • The UAE Central Bank raised the base rate on the overnight deposit facility to 5.4%.
  • The Central Bank of Saudi Arabia raised the rate of the repo repo agreement to 6%, as well as the reverse repo to 5.50%.
  • The Qatar Central Bank raised the interest on lending to 6.25% and on deposits to 5.75%.
  • The Central Bank of Bahrain raised the base interest rate on one-week deposits to 6.25%, and overnight deposits to 6%.

After the Fed’s decision today, the interest on US federal funds will be at the highest level in 22 years, after it temporarily stopped raising interest rates last June for the first time in 15 months, so that today’s decision represents the eleventh increase since March 2022.

The Fed indicated in a statement that the increase it approved at the July meeting today, Wednesday, comes as part of its efforts to tame inflation, which is still far from the target set at 2% despite its slowdown, at a time when the US economy is witnessing a soft decline.