Several Gulf central banks raised interest rates Wednesday.
The US Federal Reserve raised interest rates by half a percentage point as it continues to address high inflation in the United States. Almost immediately thereafter, the Saudi Central Bank, the Central Bank of the United Arab Emirates, the Central Bank of Bahrain and the Qatar Central Bank raised their main policy rates by 0.5%.
Kuwait did not immediately announce any monetary decisions.
Many central banks across the Middle East raised interest rates this year due to high inflation across the region and the world. The supply chain disruptions resulting from the Russian invasion of Ukraine led to global price hikes.
The following is a look at how interest rates changed throughout 2022 in the Middle East.
Saudi Arabia, the UAE, Bahrain and Qatar have all been raising their rates at the same time and mostly by the same amount as the Fed throughout the year. The three countries hiked rates in March, May, June, July, September and November.
Kuwait has taken a somewhat different approach. In May, Kuwait raised its rate by only 0.25%, while the other Gulf states raised them by 0.5%. Kuwait did the same in June.
In November, Kuwait opted not to raise interest rates at all. Saudi Arabia, the UAE and Bahrain raised rates by 0.75% at the time, mirroring the Fed. Qatar raised rates by 0.5%.
Kuwait’s strategy could reflect a more bullish outlook on inflation.
Israel also raised interest rates this year in April, May, July, August, October and November. The Bank of Israel follows its own schedule that does not correspond to the US Federal Reserve.
The Bank of Israel was not worried about inflation at the start of the year but ultimately had to act due to rising inflation in the country.
Like Israel, Egypt follows its own schedule for monetary policy. The Central Bank of Egypt raised rates in March for the first time since 2017, then did so again in May. In June, the bank decided not to raise rates.
In October, the Central Bank of Egypt raised rates again. The Egyptian pound also plummeted against the US dollar at the time and remains at around 24 pounds to the dollar.
Egypt has been particularly hard hit by inflation this year. Egypt is one of the biggest wheat consumers in the world, and before the war, it received 80% of its wheat from Russia and Ukraine. The conflict has led to price increases in Egypt as it seeks alternative wheat sources. Last month, Egypt bought Ukrainian wheat for the first time since the war.
Fuel prices in Egypt have also risen this year.
Inflation has been skyrocketing in Turkey all year, reaching 85.5% in November. Many in the country fear the official numbers are wrong and that actual inflation is even higher.
Economic orthodoxy holds that raising interest rates discourages spending and leads to lower inflation. However, President Recep Tayyip Erdogan has long rejected this notion, instead believing that lower interest rates will lower inflation by spurring economic activity.
In January, the Turkish Central Bank announced it would stop cutting interest rates. However, the bank reversed course and began cutting rates again in August. Turkey most recently cut rates in November and is not expected to do so again this year.