Saudi Arabia, UAE, Bahrain raise interest rates with US Fed hike

Saudi Arabia’s central bank on Wednesday said it is raising its reverse repo rate by 25 basis points to 1.50 percent, after the US Federal Reserve’s decision to increase the federal funds rate.

Saudi Arabian Monetary Authority (SAMA) added that it will keep the repo rate unchanged at 200 basis points (2 percent).

The reverse repo implies the rate at which commercial banks deposit money with the central bank; repo rate is used to lend money to banks.

Similar moves were also announced by the central banks in the United Arab Emirates and Bahrain.

The UAE central bank said it was raising its key interest rate by 25 basis points, the same amount as the US. The repo rate was also increased by 25 bps to 1.75 per cent.

In Bahrain, the central bank’s key policy interest rate on the one-week deposit facility was raised to 1.75 percent from 1.50 percent.

The Central Bank of Bahrain also decided to increase the overnight deposit rate from 1.25 percent to 1.50 percent and adjust both the one-month deposit rate from 2.15 percent to 2.40 percent, and the lending rate  from 3.25 percent to 3.5 percent.

Earlier on Wednesday, the US Federal Reserve raised the benchmark interest rate for the third and final time this year, with the Federal Open Market Committee increasing the rates by a quarter of a percentage point to a range of 1.25 percent to 1.50 percent.