Gulf central banks raise interest rates in line with US Federal Reserve hikes

Banks across the Gulf will raise their interest rates by a quarter of a percentage point, following the decision by the US’ Federal Reserve to do the same in order to curb inflation.

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The Central Bank of Saudi Arabia, Bahrain and the Qatar Central Bank have decided to raise interest rates by 25 basis points, UAE state press agency WAM reported on Thursday morning.

The US Central Bank or Federal Reserve raised its benchmark interest rates overnight from 5.00 percent to 5.25 percent – the tenth consecutive increase since March 2022.

Basis points are used to measure changes in interest rates, with one basis point equal to 0.01 percent or in decimal form .0001.

At a press conference following the release of the statement, head of the Fed Jerome Powell said inflation remains the chief concern for the US, and that it is too soon to say with certainty that the rate-hike cycle is over, Reuters reported on Wednesday.

The US, and many other countries across the world, are suffering from a cost-of-living crisis with prices increasing globally, something which banks hope increasing interest rates will help to alleviate.

Increased interest rates mean that the costs of borrowing for individuals and businesses become higher. This in turn means people should in theory spend less money and therefore reduce demands for goods and services which should reduce the price of them.

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