The central banks of the UAE, Saudi Arabia, Bahrain and Qatar raised their benchmark borrowing rates after the US Federal Reserve increased its key interest rate for the seventh time in 2022 to restore price stability and tame inflation that hit a four-decade high this year.
The Fed raised the policy rate by 50 basis points, a softer increase than the previous four of 75 bps each after consumer prices began to ease. This brings interest rates to a range of 4.25 per cent and 4.50 per cent, the highest level in 15 years.
Inflation in the world's largest economy fell to 7.1 per cent in November, from 7.7 per cent in October, after soaring to a pandemic high of 9.1 per cent in June.
The US central bank aims to bring inflation down from a 40-year high towards its target range of 2 per cent.
The moderation in the consumer price growth was lower than the consensus forecast of 7.3 per cent, marking the slowest pace in price growth since December 2021 and signalling the possibility that inflation in the world's largest economy may have peaked after significant interest rates increases.
The economy grew by an annual 2.9 per cent in the third quarter after two consecutive quarters of falling output but recession fears loom and job creation continues apace, with vacancies exceeding the number of unemployed Americans.
“The downturn in interest-rate sensitive sectors, rising excess inventories, lower energy prices and easing supply constraints have reduced the inflation momentum in the US and should allow the Fed to declare victory over inflation in the coming months,” said David Kohl, chief economist at Julius Baer.
Most central banks in the GCC follow the Fed's policy rate moves due to their currencies being pegged to the US dollar.
The Saudi Central Bank, better known as Sama, raised its repurchase agreement (repo) rate by half a percentage point to 5 per cent and its reverse repo rate by a similar margin to 4.5 per cent.
The UAE Central Bank raised the base rate applicable to the overnight deposit facility by 50 basis points to 4.4 per cent, from 3.9 per cent, effective from Thursday, it said on Wednesday.
The Emirates decided to maintain the rate applicable to borrowing short-term liquidity from the regulator through all standing credit facilities at 50 bps above the base rate.
The base rate, which is anchored to the Fed's interest on reserve balances (IORB), signals the general stance of the UAE Central Bank's monetary policy and provides an effective interest rate floor for overnight money market rates.
Inflation in the UAE is relatively low, compared to other parts of the world, and is projected to reach 5.6 per cent in 2022, according to the Central Bank.
The Central Bank of Bahrain increased its key rate on one-week deposits by 50 bps to to 5.25 per cent “in light of the development of the international financial market and … to ensure the smooth functioning of the money markets”.
The Bahraini regulator also raised its interest rate on overnight deposits by half a percentage point to 5 per cent, and by a similar margin on its four-week deposit rate, raising it to 6 per cent. The lending rates were also increased by half a percentage point to 6.5 per cent.
“The CBB continues to monitor global and local market developments closely in order to take any further necessary actions to maintain monetary and financial stability in the kingdom,” it said.
The Central Bank of Qatar also raised its repo rate by 50 bps to 5.25 per cent. It raised its deposit rate by a similar margin to 5 per cent and the lending rate by an equal amount to 5.5 per cent.
In October, the International Monetary Fund warned of a global cost-of-living crisis as the world economy continues to be affected by the war in Ukraine, broadening inflation pressures and a slowdown in China.
The fund maintained its global economic estimate for this year at 3.2 per cent, after a 6 per cent expansion in 2021, but cut 2023's forecast to 2.7 per cent — 0.2 percentage points lower than the July forecast.
Global inflation is expected to hit 8.8 per cent in 2022, from 4.7 per cent in 2021, but is set to decline to 6.5 per cent in 2023, the fund said.
A stronger US dollar has increased the price of imports and food costs globally, with rising inflation prompting higher interest rates from central banks around the world as they tighten monetary policy to restore price stability.
Surging oil and gas prices, exacerbated by Russia’s war in Ukraine, have also fed into already rising inflation.
After rising to a notch under $140 a barrel in March, Bent, the benchmark for more than two thirds of the world crude, has plunged to above $70 a barrel on recession fears and demand concerns in China, the biggest importer of crude globally.
The impact on economic growth of higher energy prices and shrinking consumer spending power has also hit US stocks, plunging markets into bear territory.
The Russia-Ukraine conflict has exacerbated the slowdown from the Covid-19 pandemic, upending commodity markets and disrupting global trade, which will keep food and energy prices at “historically high levels” until 2024, the World Bank said in May.
Mena economies are set to expand 5.5 per cent this year, their fastest pace since 2016, with oil-exporting countries in the region benefitting from high hydrocarbon prices, according to the World Bank.
GCC economies are projected to expand by 6.9 per cent in 2022, driven by high oil prices, as well as higher growth rates in non-oil sectors.
Despite global headwinds, the UAE economy is set to grow more than 6 per cent this year, after an expansion of 3.8 per cent in 2021, according to the IMF.
The Arab world's second-largest economy is set to post its strongest annual expansion since 2011 after it grew by 8.4 per cent in the first three months of this year on higher oil prices and measures to mitigate the impact of the Covid-19 pandemic.
Emirates NBD forecasts that the economy will expand 7 per cent in 2022 while First Abu Dhabi Bank projects a 6.7 per cent expansion and Abu Dhabi Commercial Bank estimates growth of 6.5 per cent.
Advanced economies are expected to grow 2.4 per cent this year, compared with an earlier 2.5 per cent estimate, after expanding by 5.2 per cent in 2021, according to the IMF. They are forecast to grow 1.1 per cent in 2023.
The US, the biggest of the group, is forecast to expand by 1.6 per cent, instead of 2.3 per cent as previously estimated and down from 5.7 per cent last year, according to the fund.
However, on Wednesday the Fed lowered its growth forecast next year with the US economy now expected to expand 0.5 per cent, instead of an earlier 1.2 per cent estimate.
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White hydrogen: Naturally occurring hydrogen
Chromite: Hard, metallic mineral containing iron oxide and chromium oxide
Ultramafic rocks: Dark-coloured rocks rich in magnesium or iron with very low silica content
Ophiolite: A section of the earth’s crust, which is oceanic in nature that has since been uplifted and exposed on land
Olivine: A commonly occurring magnesium iron silicate mineral that derives its name for its olive-green yellow-green colour
Tamkeen's offering
- Option 1: 70% in year 1, 50% in year 2, 30% in year 3
- Option 2: 50% across three years
- Option 3: 30% across five years
'Peninsula'
Stars: Gang Dong-won, Lee Jung-hyun, Lee Ra
Director: Yeon Sang-ho
Rating: 2/5
Who was Alfred Nobel?
The Nobel Prize was created by wealthy Swedish chemist and entrepreneur Alfred Nobel.
- In his will he dictated that the bulk of his estate should be used to fund "prizes to those who, during the preceding year, have conferred the greatest benefit to humankind".
- Nobel is best known as the inventor of dynamite, but also wrote poetry and drama and could speak Russian, French, English and German by the age of 17. The five original prize categories reflect the interests closest to his heart.
- Nobel died in 1896 but it took until 1901, following a legal battle over his will, before the first prizes were awarded.
ONCE UPON A TIME IN GAZA
Starring: Nader Abd Alhay, Majd Eid, Ramzi Maqdisi
Directors: Tarzan and Arab Nasser
Rating: 4.5/5
Company%C2%A0profile
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MATCH INFO
Uefa Champions League semi-final, first leg
Bayern Munich v Real Madrid
When: April 25, 10.45pm kick-off (UAE)
Where: Allianz Arena, Munich
Live: BeIN Sports HD
Second leg: May 1, Santiago Bernabeu, Madrid
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Company%20Profile
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INDIA%20SQUAD
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Anxiety and work stress major factors
Anxiety, work stress and social isolation are all factors in the recogised rise in mental health problems.
A study UAE Ministry of Health researchers published in the summer also cited struggles with weight and illnesses as major contributors.
Its authors analysed a dozen separate UAE studies between 2007 and 2017. Prevalence was often higher in university students, women and in people on low incomes.
One showed 28 per cent of female students at a Dubai university reported symptoms linked to depression. Another in Al Ain found 22.2 per cent of students had depressive symptoms - five times the global average.
It said the country has made strides to address mental health problems but said: “Our review highlights the overall prevalence of depressive symptoms and depression, which may long have been overlooked."
Prof Samir Al Adawi, of the department of behavioural medicine at Sultan Qaboos University in Oman, who was not involved in the study but is a recognised expert in the Gulf, said how mental health is discussed varies significantly between cultures and nationalities.
“The problem we have in the Gulf is the cross-cultural differences and how people articulate emotional distress," said Prof Al Adawi.
“Someone will say that I have physical complaints rather than emotional complaints. This is the major problem with any discussion around depression."
Daniel Bardsley
Game Changer
Director: Shankar
Stars: Ram Charan, Kiara Advani, Anjali, S J Suryah, Jayaram
Rating: 2/5
THE SIXTH SENSE
Starring: Bruce Willis, Toni Collette, Hayley Joel Osment
Director: M. Night Shyamalan
Rating: 5/5
Moon Music
Artist: Coldplay
Label: Parlophone/Atlantic
Number of tracks: 10
Rating: 3/5
New UK refugee system
- A new “core protection” for refugees moving from permanent to a more basic, temporary protection
- Shortened leave to remain - refugees will receive 30 months instead of five years
- A longer path to settlement with no indefinite settled status until a refugee has spent 20 years in Britain
- To encourage refugees to integrate the government will encourage them to out of the core protection route wherever possible.
- Under core protection there will be no automatic right to family reunion
- Refugees will have a reduced right to public funds
Dust and sand storms compared
Sand storm
- Particle size: Larger, heavier sand grains
- Visibility: Often dramatic with thick "walls" of sand
- Duration: Short-lived, typically localised
- Travel distance: Limited
- Source: Open desert areas with strong winds
Dust storm
- Particle size: Much finer, lightweight particles
- Visibility: Hazy skies but less intense
- Duration: Can linger for days
- Travel distance: Long-range, up to thousands of kilometres
- Source: Can be carried from distant regions
Three trading apps to try
Sharad Nair recommends three investment apps for UAE residents:
- For beginners or people who want to start investing with limited capital, Mr Nair suggests eToro. “The low fees and low minimum balance requirements make the platform more accessible,” he says. “The user interface is straightforward to understand and operate, while its social element may help ease beginners into the idea of investing money by looking to a virtual community.”
- If you’re an experienced investor, and have $10,000 or more to invest, consider Saxo Bank. “Saxo Bank offers a more comprehensive trading platform with advanced features and insight for more experienced users. It offers a more personalised approach to opening and operating an account on their platform,” he says.
- Finally, StashAway could work for those who want a hands-off approach to their investing. “It removes one of the biggest challenges for novice traders: picking the securities in their portfolio,” Mr Nair says. “A goal-based approach or view towards investing can help motivate residents who may usually shy away from investment platforms.”
Profile of VoucherSkout
Date of launch: November 2016
Founder: David Tobias
Based: Jumeirah Lake Towers
Sector: Technology
Size: 18 employees
Stage: Embarking on a Series A round to raise $5 million in the first quarter of 2019 with a 20 per cent stake
Investors: Seed round was self-funded with “millions of dollars”
TV: World Cup Qualifier 2018 matches will be aired on on OSN Sports HD Cricket channel
Financial considerations before buying a property
Buyers should try to pay as much in cash as possible for a property, limiting the mortgage value to as little as they can afford. This means they not only pay less in interest but their monthly costs are also reduced. Ideally, the monthly mortgage payment should not exceed 20 per cent of the purchaser’s total household income, says Carol Glynn, founder of Conscious Finance Coaching.
“If it’s a rental property, plan for the property to have periods when it does not have a tenant. Ensure you have enough cash set aside to pay the mortgage and other costs during these periods, ideally at least six months,” she says.
Also, shop around for the best mortgage interest rate. Understand the terms and conditions, especially what happens after any introductory periods, Ms Glynn adds.
Using a good mortgage broker is worth the investment to obtain the best rate available for a buyer’s needs and circumstances. A good mortgage broker will help the buyer understand the terms and conditions of the mortgage and make the purchasing process efficient and easier.
'The Sky is Everywhere'
Director:Josephine Decker
Stars:Grace Kaufman, Pico Alexander, Jacques Colimon
Rating:2/5
Company%C2%A0profile
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COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
