Mubasher: The Saudi Central Bank (SAMA) and the Central Bank of the UAE (CBUAE) raised their key interest rates by 25 basis points after the US Federal Reserve (Fed) unveiled a 25-basis-point hike on 1 February 2023.

SAMA increased its repo and reverse repo rates to 5.25% and 4.75%, respectively, according to an official statement.

In like manner, the CBUAE decided to lift the base rate applicable to the overnight deposit facility (ODF) to 4.65% from 4.40%.

Meanwhile, the UAE’s central bank maintained the rate applicable to borrowing short-term liquidity through all standing credit facilities at 50 basis points above the base rate.

Both the Saudi and Emirati central banks’ decisions became effective as of Thursday, 2 February 2023.

The Fed raised interest rates to 4.75% after its latest 50-basis-point increase on 14 December 2022.

Jerome Powell, Chairman of the Fed, commented: “It is very difficult to manage the risk of doing too little and finding out in six or 12 months that we actually were close but didn’t get the job done.”

Powell added: “If we feel like we have gone too far [. . .] inflation is coming down faster than we expect, then we have tools that would work on that.”

On 26 January 2023, the Central Bank of Kuwait (CBK) increased the discount rate to 4% from 3.50% in line with developments in economic recent conditions worldwide.