By Yousef Saba
DUBAI, Feb 1 (Reuters) - Most central banks across the
Gulf raised key interest rates on Wednesday after the Federal
Reserve increased its target interest rate by a quarter of a
percentage point, although Qatar opted to hold.
The Fed raised its target interest rate by 25 basis points,
signaling a more dovish stance after a series of larger hikes,
but maintained that increases would continue as it battles to
rein in inflation in the United States.
Gulf oil exporters tend to follow the Fed's lead on rate
moves as the majority of regional currencies are pegged to the
U.S. dollar.
The central banks of Saudi Arabia and the United Arab
Emirates, the region's two largest economies, both followed the
Fed in increasing rates by 25 bps.
The Saudi Central Bank, also known as SAMA, lifted its repo
and reverse repo rates to 5.25% and 4.75%, respectively, while
the UAE said its base rate would increase to 4.65% effective on
Thursday.
Bahrain also lifted its key interest rates by the same. Its
one-week deposit facility rate was increased to 5.5% and the
overnight deposit rate to 5.25%.
However, Qatar's central bank decided to leave rates
unchanged and kept its deposit, lending and repo rates at 5%,
5.5% and 5.25%, respectively.
"Qatar Central Bank aims to maintain the current interest
rates at an appropriate level to support sustainable economic
growth," it said in a statement.
Qatar has mirrored the Fed's moves following each policy
rate meeting since March, though in November it raised its
deposit and repo rates by 75 basis points - matching the Fed's
hike - but only lifted its lending rate by 50 basis points.
"The step-down in the magnitude of the rate hike is positive
for the GCC, who have not required such an aggressive tightening
cycle," said Monica Malik, chief economist at Abu Dhabi
Commercial Bank.
"We expect to see some greater impact of the rate hikes this
year on credit demand, though the investment programmes should
provide some support the credit growth," Malik added.
(Additional reporting by Alaa Swilam and Ahmed Tolba in Cairo;
Writing by Rachna Uppal
Editing by Nick Zieminski)
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