UAE, Kuwait, Bahrain raise interest rates after US Fed hike

The United Arab Emirates (UAE), Kuwait and Bahrain raised their key interest rates on Wednesday, following a 0.25 percentage point increase in the US Federal Reserve benchmark rate.

The Central Bank of UAE raised repo rate by 25 basis points (bps) to 2 percent, while also increasing its certificates of deposit rate by 25 bps.

Earlier this week, Saudi Arabian Monetary Authority (SAMA) had raised its repo rate from 200 bps to 225 bps and also raised its reverse repo rate by 25 basis points to 175 bps.

Saudi Arabia’s central bank said the move, which came ahead of US Federal Reserve’s decision, was aimed at stabilizing the exchange rate.

Meanwhile, Bahrain revised its interest rate on the one-week deposit facility to 2 percent on Wednesday.

The Central Bank of Bahrain also decided to increase the overnight deposit rate from 1.5 percent to 1.75 percent, the one-month deposit rate from 2.4 percent to 2.65 percent, and the lending rate from 3.5 percent to 3.75 percent.

Also, Central Bank of Kuwait said it was raising its discount rate by 25 basis points to 3 percent.

Earlier in the day, US Federal Reserve lifted its key interest rate from 1.5 percent to 1.75 percent – the highest level since 2008 – while also hinting at least more rate hike this year.

“The economic outlook has strengthened in recent months,” the Federal Open Market Committee said in a statement.

“The Committee expects that, with further gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace in the medium term and labor market conditions will remain strong,” it added.