The Saudi Arabian Monetary Authority raised its repo rate by 25 basis points to 4.50% and also increased the reverse repo rate by 25 basis points to 4.00%. This move reflects Saudi Arabia's commitment to maintaining financial stability in light of global economic changes.
Actions of Other Gulf Countries
The United Arab Emirates also raised its overnight deposit facility rate by 25 basis points to 3.9%. The Central Bank of Oman increased its repo rate by 25 basis points to 4.5%. The central banks of Qatar and Bahrain also raised their key interest rates by 25 basis points. This coordination in monetary policies among Gulf countries is aimed at preventing economic fluctuations and preserving the national currency value of these countries.
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Global Impacts on Financial Policies
Despite Donald Trump, the President of the United States, promising to lower prices during his presidency, the simultaneous impact of global import tariffs, the energy shock from the war against Iran, and capital costs associated with the AI boom have maintained economic pressures. In response to these conditions, the Federal Reserve raised its benchmark interest rate by a quarter percent to a range of 3.75% to 4.00%.
Most oil and gas exporting countries in the Gulf region typically adjust their rates in line with the Federal Reserve, as their national currency values are pegged to the US dollar. Kuwait is the only exception in this regard, with the value of the Kuwaiti dinar pegged to a basket of currencies that includes the dollar. The Central Bank of Kuwait kept interest rates unchanged and stated in a separate announcement that current data indicates "the health and robustness of monetary and financial stability" in the country.
According to recent surveys, most economies in the Gulf region will face a more severe contraction than previously predicted this year, followed by recovery in 2027. This situation has arisen particularly due to the American-Israeli military action against Iran and its impact on energy shipments passing through the Strait of Hormuz and damage to energy production facilities.
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