Brazilian central bank cuts its benchmark rate by 25 basis points to 6.5%
UAE dirham is pegged to the US dollar and follows Federal Reserve monetary policy
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| The UAE central bank, which follows the monetary policy of the US as the dirham is pegged to the dollar, uses the certificate of deposits as the instrument to reflect changes in interest rates. Ryan Carter / The National |
The Central Bank of the UAE raised its key interest rates by 25 basis points following the US Federal Reserve’s move on Wednesday to hike its benchmark rate by the same value.
The Central Bank raised the interest rate on the certificate of deposits by 25 basis points to 2 per cent. The Emirates uses certificates of deposit as a monetary policy instrument through which rates are transmitted in the absence of an independent monetary policy.
“The Central Bank of the UAE announced that, effective Thursday, March 22, 2018, it will raise interest rates applied to the issuance of its Certificates of Deposits in line with the increase in interest rates on US Dollar, following the Federal Reserve Board’s decision to increase the Federal Funds Rate by 25 basis points at its meeting,” the bank said.
Other countries in the Arabian Gulf raised their rates too. The central bank of Bahrain raised its key policy interest rate on the one-week deposit facility by 25 basis points to 2 per cent.
The central bank of Kuwait, the only central bank in the region which pegs its currency to a basket that includes the dollar, raised its discount rate by 25 basis points to 2.7 per cent.
The central banks of Saudi Arabia, Oman and Qatar did not immediately appear to raise rates following the Fed. The Saudi Arabian central bank raised its benchmark rate by 25 basis points earlier this month.
The Fed raised its Federal Fund target rate by 25 basis points to a range of 1.5 per cent to 1.7 per cent. The Federal Reserve chairman Jerome Powell said that the central bank would likely undertake bigger hikes in 2019 and 2020 as the US economy improves.