The CBUAE also has decided to maintain the rate applicable to borrowing short-term liquidity from the CBUAE through all standing credit facilities at 50 basis points above the Base Rate…reports Asian Lite News
Gulf central banks said on Wednesday they would hike their key interest rates after the US Federal Reserve upped its key policy rate by three-quarters of a percentage point for the fourth straight time.
Saudi Arabia and Bahrain increased rates by 75 basis points, while Qatar increased rates by between 50 and 75 basis points.
The Central Bank of the UAE earlier on Wednesday announced it would raise the Base Rate applicable to the Overnight Deposit Facility (ODF) by 75 basis points – from 3.15% to 3.90%, effective from Thursday, 3 November 2022.
The CBUAE also has decided to maintain the rate applicable to borrowing short-term liquidity from the CBUAE through all standing credit facilities at 50 basis points above the Base Rate.
The Base Rate, which is anchored to the US Federal Reserve’s IORB, signals the general stance of the CBUAE’s monetary policy. It also provides an effective interest rate floor for overnight money market rates.
Meanwhile, this was the US Federal Reserve’s the fourth such hike in its continuing efforts to cool the economy and curb inflation.
The Fed has planned more hikes but, as Chairman Jerome Powell said, the interest hikes will slow down at an appropriate time.
The hike was announced after a meeting of the Fed’s top decision-making body.
“The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 per cent over time,” the Fed statement said.
The Fed added: “In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation as well as economic and financial developments.”