First Published: 2017-12-14

Gulf states follow US interest rate rise
Saudi Arabia, UAE, Qatar, Bahrain all raise key benchmark interest rates by 25 basis points after move by US Federal Reserve.
Middle East Online

Most Gulf currencies are pegged to the US dollar.

RIYADH - The Gulf's dollar-pegged economies have followed a US interest rate hike to maintain the value of their currencies but at the risk of denting efforts to stimulate their flagging economies.

Saudi Arabia, the United Arab Emirates, Qatar and Bahrain all raised their key benchmark interest rates by 25 basis points after the move by the US Federal Reserve late on Wednesday.

Only Kuwait, whose dinar is pegged to a broader basket of currencies, held out, as it battles to boost its economy which is forecast by the International Monetary Fund to shrink by 2.1 percent this year.

The Saudi central bank said it was raising one of its benchmark rates to 1.5 percent although that was counterbalanced by a government announcement of $19.2 billion in stimulus funds for the private sector.

The kingdom reported a negative inflation rate in October and economic forecasts say the region's largest economy is likely to shrink this year.

The United Arab Emirates central bank raised its benchmark short-term borrowing rate to 1.5 percent while Bahrain raised its key rate to 1.75 percent and Qatar raised its to 2.5 percent.

The Kuwaiti central bank kept its main discount rate at 2.75 percent. There was no immediate word from Oman.

Raising interest rates is a tool normally used to cool heating economies and check inflation but the Gulf states are suffering from the reverse problem -- economic contraction and deflation.

Gulf oil exporters have been hit hard by the slump in world prices for crude, which provided a major part of their finances.

Huge budget deficits have forced them to cut public spending and seek to restructure their economies away from oil.

They have all been keen to boost lending to expand their private sectors.


Sudan clamps down on journalists covering bread protests

Tribal feuds spread fear in Iraq's Basra

UN warns of "lost generation" in South Sudan's grinding conflict

Trump dashes Netanyahu’s hope to move US embassy to Jerusalem

US to overtake Saudi as world’s second crude oil producer

Aid for millions of Palestinians hostage to politics

Lebanon thwarts holiday attacks using IS informant

Mortar fire wounds 14 in Syria mental hospital

Turkish military fires on Kurdish forces in Syria's Afrin

More than 32,000 Yemenis displaced in intensified fighting

Saudi's refined oil exports offset crude curbs

Turkey's EU minister rejects any option other than full membership

Turkey says not reassured by US comments on border force

UN chief wants to revive Syria gas attack probe

US has no intention to build border force in Syria

Lebanese intelligence service may be spying using smartphones worldwide

Egypt's Sisi sacks intelligence chief

Cyprus denies bail for Israeli organ trafficker

Rising Yemen currency sparks hopes of relief

Turkish ministries to investigate underage pregnancy cover-up

Iraq PM launches online appeal for election allies

Iran central bank sees claim for billions from German stock market blocked

Iraq signs deal with BP to develop Kirkuk oil fields

Israeli occupation forces raid Jenin, kill Palestinian

HRW chief says 'Nobody should be forcibly returned to Libya'

IS poses threat to Iraq one month after 'liberation'

Seven years since ousting dictator, Tunisians still protest

Iran says Trump jeopardising Airbus deals

China says Iranian oil tanker wreck located

Sudan arrests communist leader after protests

Syrian opposition joins condemnation of US 'border force'

Israeli judge detains teen until trial for viral ‘slap video’

Arab league slams US freeze of Palestinian funding

Dubai billionaire to sell 15 percent Damac stake

Britain to put women at heart of peace work in Iraq, Nigeria, South Sudan

Saudi to give Yemen government $2bn bailout

US withholds $65 million from UN agency for Palestinians

Saudi Arabia intercepts new Yemen rebel missile attack

Syria Kurds vow to cleanse enclave from Turkish 'scourges'

Israeli police find missing Briton’s belongings in desert

Algeria gas plant workers mark five years since jihadist siege

UN says over 5000 children killed or injured in Yemen war

European leaders’ response to Iran protests raises questions

Erdogan to visit Pope Francis next month

Iran slams US-backed 'border security force' in Syria