UAE, Qatar central banks hold interest rates, tracking US Fed move

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Central banks in the GCC region followed the US Federal Reserve’s (Fed) decision to keep interest rates unchanged to protect their currencies’ peg against the greenback.

The Fed held interest rates at a 22-year high for a second straight meeting, while noting that the recent rise in treasury yields may weigh on the economy and inflation.

The US central bank said it was still watching the developing impact of its past rate hikes as it mulled further action, cognisant of “the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”

Monetary policy in the GCC

Meanwhile, Qatar said it would keep its repo rate unchanged at 6 per cent, its lending rate at 6.25 per cent and its deposit rate at 5.75 per cent.

“Qatar Central Bank will continue to assess the appropriate monetary policy, taking into account all the factors that may impact financial stability and will periodically review its monetary policy as needed to address changes in economic requirements,” the Qatari central bank said in a statement.

The Central Bank of the UAE (CBUAE) maintained its base rate applicable to the overnight deposit facility at 5.40 per cent. The UAE also maintained the rate applicable to borrowing short-term liquidity from the central bank through all standing credit facilities at 50 basis points above the base rate.

قرار لجنة السياسة النقدية الخاص بأدوات السياسة النقدية – نوفمبر 2023. #مصرف_قطر_المركزي pic.twitter.com/Mq1OpJckR9

— مصرف قطر المركزي (@QCBQATAR) November 1, 2023

“The base rate, which is anchored to the US Federal Reserve’s Interest on Reserve Balances (IORB), signals the general stance of the CBUAE’s monetary policy,” the UAE central bank said in a statement. The central bank also said the base rate provides an effective interest rate floor for overnight money market rates in the country.

GCC central banks normally change their interest rates in lockstep with the US Fed as Gulf states’ currencies – the UAE dirham, Qatari riyal, Saudi riyal and Bahraini dinar – are pegged to the dollar, with Kuwait the only exception as dinar is linked to a basket of currencies.

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