The central banks of the UAE, Saudi Arabia, Bahrain, Qatar and Oman raised their benchmark borrowing rates after the US Federal Reserve increased its key interest rate to tame inflation and restore price stability.
The Fed bumped up the policy rate for a third consecutive time this year by 25 basis points (bps) as the labour market remains tight, the unemployment rate is at a multi-decade low and the central bank continues to try to bring inflation down to its target range of 2 per cent after prices hit a four-decade last year.
The move comes at a time of mounting concern about the stability of the regional banking sector in the US, the world's largest economy, after recent failures of four lenders.
This is the tenth rate increase by the US central bank since it started monetary tightening in March 2022, pushing rates in the US to their highest since 2007, shortly before the start of the 2008 global financial crisis.
US inflation data released last month showed that price pressures are not over yet, with the Fed’s preferred inflation measure, the core personal expenditures price index, up by an annual 4.6 per cent.
“The US banking system is sound and resilient. Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring and inflation,” the Fed said.
“The extent of these effects remains uncertain. The committee remains highly attentive to inflation risks."
Most central banks in the six-member GCC bloc follow the Fed's policy rate moves due to their currencies being pegged to the US dollar, except for Kuwait which links its dinar to a basket of currencies.
The Saudi Central Bank, better known as Sama, raised its repurchase agreement (repo) rate by a quarter-point to 5.75 per cent and its reverse repo rate by a similar margin to 5.25 per cent.
The kingdom's inflation rate for 2022 was estimated at 2.6 per cent and, according to preliminary forecasts, has been forecast at 2.1 per cent in 2023, Saudi Finance Minister Mohammed Al Jadaan said in December. Consumer prices in the kingdom rose 2.7 per cent year-on-year in March, the lowest rate of price growth since July 2022.
The UAE Central Bank raised its benchmark borrowing rate raised its base rate for the overnight deposit facility by a quarter of a percentage point to 5.15 per cent from 4.9 per cent, effective from Thursday.
It maintained the rate applicable to borrowing short-term liquidity from the regulator through all standing credit facilities at 50 bps above the base rate, the regulator said on Wednesday.
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.
The UAE economy is estimated to have grown by 7.6 per cent last year, the highest in 11 years, after expanding 3.9 per cent in 2021, according to the country's Central Bank. It is projected to grow by 3.9 per cent in 2023 and 4.3 per cent in 2024, according to the regulator.
Meanwhile, the Central Bank of Bahrain also increased its key rate on one-week deposits by 25 bps to 6 per cent.
The Bahraini regulator raised its interest rate on overnight deposits by a quarter-point to 5.75 per cent, and by a similar margin on its four-week deposit rate, raising it to 6.75 per cent. The lending rates was also increased by a quarter of a percentage point to 7 per cent.
The Central Bank of Qatar raised its repo rate by a quarter of a percentage point to 5.75 per cent. It also increased its deposit rate by a similar margin pushing it to 5.5 per cent and the lending rate by 25 bps to 6 per cent.
The Central Bank of Oman increased its repo rate for local banks by 25 bps to 5.75 per cent. The repo rate is the policy rate that allows commercial banks to acquire short term liquidity from the central bank as the lender of last resort.
The Central Bank of Kuwait left rates unchanged. It last raised its key policy rate, the discount rate, to 4 per cent in January 2023.
Inflation in GCC economies has been significantly lower than in most advanced and emerging countries. This is because subsidies and caps on certain products, the strengthening of the US dollar, and limited share of food in the consumer price index basket have helped to offset imported inflationary pressures and appear to have peaked in the last months of 2022, according to the International Monetary Fund.
Inflation in the Emirates — stoked by increasing energy prices, imported inflation and rising employment — stood at 4.8 per cent in 2022 and has been projected at 3.2 per cent and 2.8 per cent in 2023 and 2024 respectively, according to the Central Bank's Quarterly Economic Review 2022.
That compares with a global inflation rate of 8.7 per cent in 2022, according to International Monetary Fund estimates. Global inflation is set to fall to 7 per cent this year and 4.9 per cent in 2024, which is still above the preferred 2 per cent target of central banks.
In a report last month, the Institute of International Finance projected an even lower inflation rate of 2.4 per cent for the UAE in 2023, supported by lower global commodity prices and manufacturing unit values.
Despite tighter global financial conditions the UAE's non-hydrocarbon real growth will remain strong at 4.8 per cent this year, the Washington-based IIF said.
That is above the 4.2 per cent estimate of the UAE Central Bank for this year and the 4.6 per cent forecast for 2024.
Annual oil gross domestic product growth is forecast at 3 per cent and 3.5 per cent in 2023 and 2024, respectively, according to the UAE Central Bank.
“Rising interest rates will have limited impact on economic activity in the UAE,” the IIF said.
“The new corporate income tax will be effective in July of this year, boosting non-hydrocarbon revenues in 2024 and 2025, and thus helping to lower the fiscal break-even oil price to below $65 per barrel,” it said.
UAE banks remain adequately capitalised while the average loan-to-deposit ratio edged down to 86 per cent in December 2022, according to the IIF.
The net foreign assets of commercial banks more than doubled to $104 billion at the end of 2022. IIF deposits and credit to the economy to grow by about 8 per cent in 2023.
First quarter results from the banking sector "confirm that economic activity remains robust … sector revenues have increased by almost 50 per cent on average, with profit growth stronger still, at close to 75 per cent year-on-year", Rahul Shah at Tellimer Research said in a research note this week.
"Retail banking is riding on a wave of high consumer confidence and a growing population."
The Emirates remains the main regional destination of foreign direct investment inflows, attracting about $22 billion in 2022, or about 4.4 per cent of GDP, one of the highest among emerging economies, the IIF said.
“Such elevated FDI is explained by the friendly business environment, excellent infrastructure and relatively diversified economy by regional standards,” the IIF said.
Killing of Qassem Suleimani
Cherry
Directed by: Joe and Anthony Russo
Starring: Tom Holland, Ciara Bravo
1/5
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Spec%20sheet
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Brief scores:
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Bale 8'
MATCH INFO
UAE Division 1
Abu Dhabi Harlequins 12-24 Abu Dhabi Saracens
Mica
Director: Ismael Ferroukhi
Stars: Zakaria Inan, Sabrina Ouazani
3 stars
UAE currency: the story behind the money in your pockets
COMPANY PROFILE
Name: Akeed
Based: Muscat
Launch year: 2018
Number of employees: 40
Sector: Online food delivery
Funding: Raised $3.2m since inception
Ferrari 12Cilindri specs
Engine: naturally aspirated 6.5-liter V12
Power: 819hp
Torque: 678Nm at 7,250rpm
Price: From Dh1,700,000
Available: Now
Juliot Vinolia’s checklist for adopting alternate-day fasting
- Don’t do it more than once in three days
- Don’t go under 700 calories on fasting days
- Ensure there is sufficient water intake, as the body can go in dehydration mode
- Ensure there is enough roughage (fibre) in the food on fasting days as well
- Do not binge on processed or fatty foods on non-fasting days
- Complement fasting with plant-based foods, fruits, vegetables, seafood. Cut out processed meats and processed carbohydrates
- Manage your sleep
- People with existing gastric or mental health issues should avoid fasting
- Do not fast for prolonged periods without supervision by a qualified expert
The five pillars of Islam
Profile
Company: Justmop.com
Date started: December 2015
Founders: Kerem Kuyucu and Cagatay Ozcan
Sector: Technology and home services
Based: Jumeirah Lake Towers, Dubai
Size: 55 employees and 100,000 cleaning requests a month
Funding: The company’s investors include Collective Spark, Faith Capital Holding, Oak Capital, VentureFriends, and 500 Startups.
Liverpool’s fixtures until end of 2019
Saturday, November 30, Brighton (h)
Wednesday, December 4, Everton (h)
Saturday, December 7, Bournemouth (a)
Tuesday, December 10, Salzburg (a) CL
Saturday, December 14, Watford (h)
Tuesday, December 17, Aston Villa (a) League Cup
Wednesday, December 18, Club World Cup in Qatar
Saturday, December 21, Club World Cup in Qatar
Thursday, December 26, Leicester (a)
Sunday, December 29, Wolves (h)
Essentials
The flights
Emirates flies direct from Dubai to Seattle from Dh6,755 return in economy and Dh24,775 in business class.
The cruise
UnCruise Adventures offers a variety of small-ship cruises in Alaska and around the world. A 14-day Alaska’s Inside Passage and San Juans Cruise from Seattle to Juneau or reverse costs from $4,695 (Dh17,246), including accommodation, food and most activities. Trips in 2019 start in April and run until September.
The burning issue
The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.
Read part four: an affection for classic cars lives on
Read part three: the age of the electric vehicle begins
Read part one: how cars came to the UAE
Killing of Qassem Suleimani
The years Ramadan fell in May
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TRAP
Starring: Josh Hartnett, Saleka Shyamalan, Ariel Donaghue
Director: M Night Shyamalan
Rating: 3/5
SPEC%20SHEET%3A%20SAMSUNG%20GALAXY%20S23%20ULTRA
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How much do leading UAE’s UK curriculum schools charge for Year 6?
- Nord Anglia International School (Dubai) – Dh85,032
- Kings School Al Barsha (Dubai) – Dh71,905
- Brighton College Abu Dhabi - Dh68,560
- Jumeirah English Speaking School (Dubai) – Dh59,728
- Gems Wellington International School – Dubai Branch – Dh58,488
- The British School Al Khubairat (Abu Dhabi) - Dh54,170
- Dubai English Speaking School – Dh51,269
*Annual tuition fees covering the 2024/2025 academic year
'THE WORST THING YOU CAN EAT'
Trans fat is typically found in fried and baked goods, but you may be consuming more than you think.
Powdered coffee creamer, microwave popcorn and virtually anything processed with a crust is likely to contain it, as this guide from Mayo Clinic outlines:
Baked goods - Most cakes, cookies, pie crusts and crackers contain shortening, which is usually made from partially hydrogenated vegetable oil. Ready-made frosting is another source of trans fat.
Snacks - Potato, corn and tortilla chips often contain trans fat. And while popcorn can be a healthy snack, many types of packaged or microwave popcorn use trans fat to help cook or flavour the popcorn.
Fried food - Foods that require deep frying — french fries, doughnuts and fried chicken — can contain trans fat from the oil used in the cooking process.
Refrigerator dough - Products such as canned biscuits and cinnamon rolls often contain trans fat, as do frozen pizza crusts.
Creamer and margarine - Nondairy coffee creamer and stick margarines also may contain partially hydrogenated vegetable oils.
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MATCH INFO
England 19 (Try: Tuilagi; Cons: Farrell; Pens: Ford (4)
New Zealand 7 (Try: Savea; Con: Mo'unga)
Killing of Qassem Suleimani
Killing of Qassem Suleimani
KILLING OF QASSEM SULEIMANI
Zayed Sustainability Prize
UAE currency: the story behind the money in your pockets
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The Voice of Hind Rajab
Starring: Saja Kilani, Clara Khoury, Motaz Malhees
Director: Kaouther Ben Hania
Rating: 4/5
UAE currency: the story behind the money in your pockets
UAE rugby in numbers
5 - Year sponsorship deal between Hesco and Jebel Ali Dragons
700 - Dubai Hurricanes had more than 700 playing members last season between their mini and youth, men's and women's teams
Dh600,000 - Dubai Exiles' budget for pitch and court hire next season, for their rugby, netball and cricket teams
Dh1.8m - Dubai Hurricanes' overall budget for next season
Dh2.8m - Dubai Exiles’ overall budget for next season
PROFILE
Name: Enhance Fitness
Year started: 2018
Based: UAE
Employees: 200
Amount raised: $3m
Investors: Global Ventures and angel investors
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The National photo project
Chris Whiteoak, a photographer at The National, spent months taking some of Jacqui Allan's props around the UAE, positioning them perfectly in front of some of the country's most recognisable landmarks. He placed a pirate on Kite Beach, in front of the Burj Al Arab, the Cheshire Cat from Alice in Wonderland at the Burj Khalifa, and brought one of Allan's snails (Freddie, which represents her grandfather) to the Dubai Frame. In Abu Dhabi, a dinosaur went to Al Ain's Jebel Hafeet. And a flamingo was taken all the way to the Hatta Mountains. This special project suitably brings to life the quirky nature of Allan's prop shop (and Allan herself!).
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Director: Jafar Panahi
Stars: Vahid Mobasseri, Mariam Afshari, Ebrahim Azizi, Hadis Pakbaten, Majid Panahi, Mohamad Ali Elyasmehr
Rating: 4/5
UAE currency: the story behind the money in your pockets
