The central banks of the UAE, Bahrain and Saudi Arabia have raised key interest rates by 25 basis points following a similar announcement made on 13 December by the US Federal Reserve.

This takes the UAE Central Bank’s repo rate, or the interest charged when lending money to commercial banks, for lending short-term liquidity against certificates of deposit to 1.75 per cent.

In contrast, the Saudi Arabian Monetary Agency (SAMA) has decided to keep its repo rate unchanged at 2.0 per cent but raised its reverse repo rate, the rate at which commercial banks deposit money with the central bank, by 25 basis points to 1.50 per cent.

According to London-based news agency Reuters, the Central Bank of Bahrain raised key policy interest rate on one-week deposit facility to 1.75 percent from 1.50 percent.

Bahrain also increased its overnight deposit rate to 1.50 percent from 1.25 per cent, the one-month deposit rate to 2.40 per cent from 2.15 percent, and the lending rate to 3.50 percent from 3.25 percent.

The currencies of most GCC states are pegged to the US dollar, which means they closely mimic changes in the US Federal Reserve interest rates.