Gulf Central Banks Maintain Interest Rates After Federal Reserve’s Decision

Central banks in the Gulf region, including Qatar and the United Arab Emirates (UAE), have opted to maintain their interest rates. This decision aligns with the Federal Reserve’s choice to keep interest rates at a 22-year high during its last two meetings, reflecting ongoing concerns regarding the economic and inflationary consequences of rising Treasury yields.

The Federal Reserve’s approach is being closely monitored by global financial markets, as the central bank’s high interest rates serve as a precautionary measure against the potential negative impacts of increasing yields.

Gulf central banks, adhering to their dollar-pegging frameworks, have followed this trend by keeping their rates stable to uphold their currencies’ link to the US dollar. This practice is typical among most banks in the Gulf Cooperation Council (GCC), apart from Kuwait, which ties its currency to a basket of various currencies.

In particular, Qatar has maintained its repo rate at 6%, with a lending rate of 6.25% and a deposit rate of 5.75% to manage liquidity. The UAE has likewise kept its base rate for overnight deposits at 5.40%. These decisions highlight the commitment of both nations to foster stability in their financial markets during a time of global economic uncertainty.