The Saudi Central Bank announced raising the rate of repurchase agreements “repo” by 0.5%, from 1.25 to 1.75%.
The Saudi Central Bank also raised the rate of reverse repurchase agreements by 0.5%, from 0.75 to 1.25%.
He stated that these decisions are consistent with his goal of maintaining monetary and financial stability.
The Central Bank of Kuwait said today, Wednesday, that it decided to raise the discount rate by a quarter of a percentage point, from 1.75% to 2.00%, as of May 5, following the US Federal Reserve’s decision to increase interest rates.
Central Bank Governor Basil Ahmed Al-Haroun said that the decision “comes in light of the follow-up to developments in the local and global economic conditions, geopolitical developments and their impact on the significant rises in global inflation rates resulting from the rise in energy and commodity prices and disruptions in supply chains, which constitute a major source of imported inflation and its effects.” A reflection on the consumer price index in the State of Kuwait.
In a related context, the Central Bank of Bahrain said today, Wednesday, that it raised the basic interest rate for deposits for a week by 50 basis points to 1.75%.
The Central Bank of Bahrain also increased the interest rate for deposits and overnight lending by 50 basis points to 1.5% and 3.0%, respectively, and raised the interest rate for four-week deposits by 75 basis points to 2.5%.
The Central Bank of the United Arab Emirates said today, Wednesday, that it decided to increase the basic interest rate by 50 basis points, starting from Thursday.
The Central Bank of the UAE also decided to keep the rate that applies to borrowing short-term liquidity from the Central Bank through all existing credit facilities at 50 basis points above the base rate.
The Qatar Central Bank decided to raise the deposit interest by 50 basis points to 1.50% and the lending interest by 25 basis points to 2.75%.
The decisions of the central banks of the Emirates, Kuwait and Bahrain come after the Federal Reserve (the US central bank) raised the main interest rate by half a percentage point on Wednesday, as the most aggressive step so far in its battle against inflation spikes.
Along with the price hike, the central bank has indicated that it will start reducing asset holdings on its $9 trillion balance sheet. The Fed was buying bonds to keep interest rates low and money flowing through the economy, but the rate hike necessitated a dramatic rethink of monetary policy.
The Fed stated that COVID-19-related shutdowns in China are likely to exacerbate supply chain problems, in addition to Russia’s invasion of Ukraine causing enormous humanitarian and economic hardship.