The Central Bank of the United Arab Emirates and the Saudi Central Bank said Wednesday they would raise their benchmark interest rates in tandem with the US Federal Reserve, reinforcing their commitment to maintain monetary stability.
The CBUAE increased its overnight deposit facility base rate by 25 basis points to 3.9%, effective Thursday. At the same time, the short-term liquidity borrowing rate across all standing credit facilities was kept at 50 basis points above the base rate.
Meanwhile, SAMA increased its repurchase agreement rate, or repo rate, by 25 basis points, bringing it to 4.50%. Likewise, the reverse repo rate was elevated to 4% after a 25-basis-point hike.
The moves come after the Fed's first rate increase since 2023, lifting the benchmark target range by 25 basis points to the 3.75% to 4% range while hinting at another raise before entering a long hold through 2027.
"Markets had moved to swiftly price such an outcome in the wake of Chair Kevin Warsh's hawkish Jackson Hole address, with subsequent hotter-than-anticipated jobs and core inflation data merely making it a formality," ING said following the Fed's rate decision.
"Ordinarily the assumption is that if the Fed hikes, they don't move just once, and indeed their forecast table does have a further hike pencilled in. However, this time around we think it may end up being a one-off."
