Saudi Arabia and the United Arab Emirates raised interest rates on Wednesday following the US, while Qatar abstained from taking such step.
The US Federal Reserve earlier on Wednesday decided to raise its key policy rate by 0.25%, citing efforts to bring down inflation.
The Saudi Central Bank, the Central Bank of the UAE, the Central Bank of Oman and the Central Bank of Bahrain subsequently announced they would raise their rates by the same percentage, according to separate press releases from the banks.
The Qatar Central Bank, on the other hand, said in a press release Wednesday that it would keep its rates unchanged.
Why it matters: Gulf central banks raised interest rates several times throughout 2022 in keeping with the Federal Reserve. Qatar’s decision to not raise rates could indicate the Gulf state has a relatively bullish outlook on inflation. The bank officially said the decision was motivated by a desire to “support sustainable economic growth.”
The New York-based credit ratings agency Fitch said in a report last month that inflation in Qatar would decrease from 5% to below 2.9% in 2023 due to lower global commodity prices and the previous interest rate hikes.
Qatar’s consumer price index rose by 5.9% on the year in December 2022. This index is used to measure inflation. The Qatari government said the rise was due to the effects of the World Cup, according to the official Qatar News Agency.
Qatar’s decision came somewhat as a surprise. Fitch predicted that Qatar would raise rates along with the Fed in early 2023. In December, Qatar, Saudi Arabia and other Gulf central banks raised rates along with the Fed.
Meanwhile, inflation is on the rise in Saudi Arabia. Annual inflation increased to 3.3% in December, up from 2.9% in November.
In the UAE, the Central Bank predicted inflation would reach 5.6% by the end of 2022. This would be the highest rate since 2016, according to Reuters.
Know more: The Central Bank of Kuwait raised its interest rates by 0.5% last month. Kuwait often acts independently on its rates decisions and does not necessarily mirror the Federal Reserve.
Editor's note: this article was updated to indicate that the Central Bank of Oman also raised its main rate.