Gulf central banks follow in the footsteps of the US Federal Reserve

Highlights: Four Gulf central banks raised key interest rates after the US central bank raised interest rates by a quarter of a percentage point. The dollar fell as a result, while gold benefited slightly. Central banks in Saudi Arabia, the United Arab Emirates, Bahrain, Qatar and Oman increased interest rates. The impact of the rate hike on credit growth and non-oil activity in the region has so far been limited, an analyst said. All eyes are on the European Central Bank, which is expected to raise interest rates for a seventh consecutive meeting on Thursday.

Four Gulf central banks raised key interest rates after the US central bank raised interest rates by a quarter of a percentage point, and the dollar fell as a result, while gold benefited slightly.

Four central banks in the Gulf region raised key interest rates following the Federal Reserve raising its interest rate target by a quarter of a percentage point, and the dollar fell as the bank threatened to stop the monetary tightening process.

The US central bank raised interest rates by 25 basis points on Wednesday to reach a level between 5% and 5.25%, the tenth consecutive increase since March 2022, but hinted that it may refrain from further hikes.

Central banks in Saudi Arabia, the United Arab Emirates, Bahrain, Qatar and Oman increased interest rates by 25 basis points.

Gulf oil and gas exporters tend to follow the Fed's path in interest rate movements, as most of the region's currencies are pegged to the dollar.

Justin Alexander, director of Gulf Economics, said the impact of the rate hike on credit growth and non-oil activity in the region has so far been limited.

Alexander, who is also a Gulf analyst at Global Source Partners, added that "another 25 basis points will not make much difference" and that "the interest rate outlook is more important and it looks like we may be close to the peak."

Saudi Arabia

The Saudi Central Bank said in a statement that it decided on Wednesday to raise the repo rate by 25 basis points to 5.75% and the reverse repo rate by 25 basis points to 5.25%.

Qatar

Qatar raised deposit, lending and repo rates by 25 basis points, bringing the deposit rate to 5.5%, lending to 6% and repurchase to 5.75%.

U.A.E

The Central Bank of the UAE announced that it has decided to raise the base rate on overnight deposit facilities by 25 base points to 5.15%.

Bahrain

Bahrain raised its base rate to raise the one-week deposit rate to 6%.

Oman

The Central Bank of Oman (CBO) announced on Thursday that it has raised the interest rate on repo operations for local banks by 25 basis points to 5.75%.

Gold prices rose to $2072,19.<> an ounce (European News Agency)

Dollar Falls

The dollar fell against most major currencies on Thursday after the Federal Reserve opened the door to a pause in a cycle of sharp monetary tightening.

The Fed's decision sent the dollar broadly lower and Treasury yields tumbled, with traders taking the comments as a signal of peak U.S. interest rates.

Amid weakness in Asian trading on Thursday, sterling rose 0.2% to an almost 11-month high of $1.25905, while the euro rose 0.20% to $1.1080, hovering near its latest peak in a year.

The dollar index fell in the latest reading 0.25% to 100.850 points after falling more than 0.6% in the previous session.

The cautious risk appetite supported the safe-haven Japanese yen when the market was turbulent, rising about 0.1% against the dollar to 134.56.

The risk-sensitive Australian and New Zealand dollars reversed their previous losses in Asian trading, rising 0.3% each to $0.6692 and $0.6249, respectively.

All eyes are on the European Central Bank, which is expected to raise interest rates for a seventh consecutive meeting later on Thursday.

What about gold?

Gold prices climbed to close to record highs on Thursday after the Federal Reserve raised interest rates.

By 00:35 GMT, spot gold was up to $2055,54.2063 an ounce, and U.S. gold futures were up at $20,<>.<> an ounce.

Earlier in the session, gold prices rose to $2072,19.2072 an ounce, approaching all-time highs of $49,2020.<> an ounce reached in <>.