Saudi, UAE central banks raise interest rates following Fed rate hike

The central banks of Saudi Arabia and the United Arab Emirates raised interest rates on Wednesday, following a rate hike by the US Federal Reserve. 

The Saudi Arabian Monetary Authority (SAMA) on Wednesday raised its reverse repo rate from 200 basis points to 225 basis points and its repo rate from 250 basis points to 275 basis points, with immediate effect.

“The objective of policy rate adjustment is to maintain monetary stability amid global financial market developments,” SAMA noted in a statement.

“SAMA will continue to monitor and manage domestic system liquidity to ensure its adequate availability for smooth banking operations as well as to meet the domestic economic needs,” it added.

The Central Bank of the UAE also announced on Wednesday it would raise interest rates, effective Sep. 27, 2018.

The regulator said it would raise interest rates applied to the issuance of its Certificates of Deposits in line with the increase in interest rates on the US Dollar, following the Fed’s decision.

The repo rate applicable to borrowing short-term liquidity from CBUAE against Certificates of Deposits has also been increased by 25 basis points.

The US Federal Reserve on Wednesday decided to lift the target range for the federal funds rate to a range of 2.00 percent to 2.25 percent, “in view of realized and expected labor market conditions and inflation.” The latest rate hike is the third one this year.

The US central bank still foresees another rate increase in December, three more next year, and one increase in 2020.