Central Banks in Saudi Arabia, Bahrain and United Arab Emirates have raised their benchmark borrowing rates in response to the recent Federal Reserve rate increase. The Fed increased the rate by around 25 basis points as it continues to push towards its target of tackling inflation and restoring price stability. The GCC area largely follows the Fed’s policy rate moves due to the value of their currencies being pegged to the US dollar. The Kingdom of Kuwait is an exception in the six-member economic bloc as its dinar is linked to a basket of currencies. The US Labour Department’s employment cost index released yesterday showed that inflation continued to outpace wage growth in most US cities. Annually, wages and salaries rose by 5.1% in the 12 months through December, compared with an annual inflation rate of 6.5% in December. While inflation eased from 7.1% in November, the Fed could continue to raise interest rates further. The Central Bank of the United Arab Emirates raised its base rate for the overnight deposit facility by 25 basis points to 4.65%, effective from Thursday, while maintaining rates for its other services. The Saudi Central Bank increased its repurchase agreement rate by 25 basis points to 5.25% and its reverse rate by a similar margin to 4.75%. Similarly, the Central Bank of Bahrain raised its key interest rates on one-week deposits, overnight deposits and four-week deposits by 25 basis points. The Central Bank of Qatar, however, decided to maintain current rates. GCC economies expanded by an estimated 5.7% in 2022, their highest in a decade owing to a rise in energy revenue. However, GCC countries are projected to have grown 6.9% in 2022 and are expected to slow down to 3.7% in 2023 and 2.4% in 2024, primarily down to lower oil prices. Meanwhile, advanced economies will have a more pronounced slowdown, with growth being forecast to decline to 1.2% in 2023 and 1.4% in 2024.
عبدالرحمان زمین پیما
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آرمان جعفری
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