Gulf central banks, including those of Qatar and the United Arab Emirates (UAE), have held their interest rates steady, in response to the Federal Reserve’s decision to maintain interest rates at a 22-year high for two consecutive meetings. This decision comes amid concerns over the potential economic and inflationary impacts of escalating Treasury yields.
The Federal Reserve’s decision has been closely watched by global financial markets, as it has held its interest rates at a historically high level due to fears of rising Treasury yields. The US central bank’s move is being viewed as a defensive strategy against the potential economic fallout from rising yields.
In line with their dollar-pegging policy, Gulf central banks have followed suit, keeping their rates steady to defend their currencies’ peg to the US dollar. This strategy is common among most Gulf Cooperation Council (GCC) central banks, with the exception of Kuwait, which pegs its dinar to a variety of currencies.
Specifically, Qatar has kept its repo rate at 6%, lending rate at 6.25%, and deposit rate at 5.75% for liquidity management purposes. Similarly, the UAE has maintained its base rate for the overnight deposit facility at 5.40%. These decisions underscore the commitment of these countries to ensure stability in their respective financial markets amid global economic uncertainties.
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