Gulf central banks mirror US Fed by halting rate hike

Wam

The Central Bank of the UAE and Qatar Central Bank have decided to maintain interest rates after the US Federal Reserve board announced it will keep the key borrowing rates unchanged.

The UAE’s central bank will hold the base rate applicable to the overnight deposit facility steady at 5.15 percent as of Thursday 15 June, the UAE state-run Wam news agency reported.

In addition it decided to maintain the rate applicable to borrowing short-term liquidity from the apex bank through all standing credit facilities at 50 basis points above the base rate.

Qatar Central Bank announced that it will also continue with the current interest rates for deposits at 5.50 percent, with lending at 6 percent and repo at 5.75 percent.

The Fed left key interest rates in a target range of 5-5.25 percent, describing the US growth and the job market as holding up better than expected in spite of aggressive monetary policy tightening.

However, BofA Global Research expects two more quarter percentage point interest rate hikes from the Fed this year, taking its terminal rate forecast to 5.5 percent to 5.75 percent.

The base rate, anchored to the Fed’s rates, provides an effective interest rate floor for overnight money market rates in the UAE.

The other Gulf central banks have yet to announce whether they will be changing their rates.