US Fed to raise interest rates gradually but will Gulf follow suit?

Federal Reserve chairman Jerome Powell announces plan as economic outlook in US remains strong
US Fed to raise interest rates gradually but will Gulf follow suit?
Gulf central banks that peg their currency to the dollar - including the UAE and Saudi Arabia - typically follow Fed decisions in lockstep.
By Sam Bridge
Tue 17 Jul 2018 06:09 PM

The Federal Reserve will continue to raise interest rates gradually as the economic outlook remains strong despite uncertainty over trade policy, Federal Reserve Chairman Jerome Powell said Tuesday.

Powell was upbeat about the US economy, noting that job creation remained strong and inflation was right around the Fed's two percent target.

However, in his prepared testimony, he acknowledged it was "difficult to predict the ultimate outcome of current discussions over trade policy."

Gulf central banks that peg their currency to the dollar - including the UAE and Saudi Arabia - typically follow Fed decisions in lockstep, but Kuwait pegs its dinar to a basket of currencies and chose to sit out the previous two increases in US rates in 2017 in order to preserve growth and keep down borrowing costs.

Bahrain has enough foreign reserves to maintain its currency’s peg to the US dollar, central bank Governor Rasheed Al-Maraj said in May.

In April, Oman central bank governor Tahir Al Amri said the country has the means to maintain its currency peg and has no plans to change it even though the decline in oil prices has hurt its finances.

* With AFP

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