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4 Gulf Banks Raise Interest Rates by 0.25%, Qatar Holds

The city of Riyadh (Asharq Al-Awsat)
The city of Riyadh (Asharq Al-Awsat)
    Dubai -Asharq Al-Awsat
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4 Gulf Banks Raise Interest Rates by 0.25%, Qatar Holds

The city of Riyadh (Asharq Al-Awsat)
The city of Riyadh (Asharq Al-Awsat)

The majority of central banks in the Gulf region raised the main interest rates on Thursday, following a decision by the US Federal Reserve to raise its key policy rate by 0.25%, in an effort to counter inflation.

Qatar kept the interest rate unchanged, while the Saudi Central Bank (SAMA), the Central Bank of the UAE, the Central Bank of Oman and the Central Bank of Bahrain announced in separate statements they would raise their rates by 0.25%.

The Saudi Central Bank (SAMA) said it increased its key interest rates by 25 basis points, following the US Federal Reserve’s move. It added that it lifted its repurchase agreement (repo) and reverse repo rates by 25 bps to 5.25% and 4.75%, respectively.

Similarly, the UAE Central Bank raised its base rate for the overnight deposit facility (ODF) by a quarter of a percentage point to 4.65 percent, from 4.4 percent, effective from Thursday.

For its part, the Central Bank of Bahrain increased its key rate on one-week deposits by 25 bps to 5.5 percent, citing “development of the international financial market and… to ensure the smooth functioning of the money markets in the kingdom”.

On the other hand, the Qatar Central Bank (QCB) decided to keep the current interest rates unchanged, saying that it would maintain the repo rate at 5.25 per cent, the deposit rate at 5 percent and the lending rate at 5.5 percent.

“The Qatar Central Bank aims to keep current interest rates at appropriate levels to support economic growth,” the QCB said in a statement.

“The step-down in the magnitude of the rate hike is positive for the GCC, who have not required such an aggressive tightening cycle,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

“We expect to see some greater impact of the rate hikes this year on credit demand, though the investment programs should provide some support for credit growth,” she added.

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Washington Urges Israel to Extend Cooperation with Palestinian Banks

A West Bank Jewish settlement is seen in the background, while a protestor waves a Palestinian flag during a protest against Israel's separation barrier in the West Bank village of Bilin in 2012. (AP)
A West Bank Jewish settlement is seen in the background, while a protestor waves a Palestinian flag during a protest against Israel's separation barrier in the West Bank village of Bilin in 2012. (AP)
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Washington Urges Israel to Extend Cooperation with Palestinian Banks

A West Bank Jewish settlement is seen in the background, while a protestor waves a Palestinian flag during a protest against Israel's separation barrier in the West Bank village of Bilin in 2012. (AP)
A West Bank Jewish settlement is seen in the background, while a protestor waves a Palestinian flag during a protest against Israel's separation barrier in the West Bank village of Bilin in 2012. (AP)

The United States on Thursday called on Israel to extend its cooperation with Palestinian banks for another year, to avoid blocking vital transactions in the occupied West Bank.

"I am glad that Israel has allowed its banks to continue cooperating with Palestinian banks, but I remain convinced that a one-year extension of the waiver to facilitate this cooperation is needed," US Treasury Secretary Janet Yellen said Thursday, on the sidelines of a meeting of G20 finance ministers in Rio de Janeiro.

In May, Israeli Finance Minister Bezalel Smotrich threatened to cut off a vital banking channel between Israel and the West Bank in response to three European countries recognizing the State of Palestine.

On June 30, however, Smotrich extended a waiver that allows cooperation between Israel's banking system and Palestinian banks in the occupied West Bank for four months, according to Israeli media, according to AFP.

The Times of Israel newspaper reported that the decision on the waiver was made at a cabinet meeting in a "move that saw Israel legalize several West Bank settlement outposts."

The waiver was due to expire at the end of June, and the extension permitted Israeli banks to process payments for salaries and services to the Palestinian Authority in shekels, averting a blow to a Palestinian economy already devastated by the war in Gaza.

The Israeli threat raised serious concerns in the United States, which said at the time it feared "a humanitarian crisis" if banking ties were cut.

According to Washington, these banking channels are key to nearly $8 billion of imports from Israel to the West Bank, including electricity, water, fuel and food.