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Thu 22 Mar 2018 08:16 AM

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UAE follows Fed by raising interest rate

Kuwait raises key rate for first time in a year to follow Fed

UAE follows Fed by raising interest rate
Kuwait’s central bank raised the discount rate to 3 percent to keep the dinar competitive

UAE raised  its key interest rate on Wednesday, tracking a quarter point increase in US Federal Reserve benchmark rate.

The UAE raised its repo rate by 25 basis points to 2 percent, and increased its certificates of deposit rate by the same amount.

Kuwait also raised its key rate for the first time in a year, with the country's central bank saying in its statement it had broken that pattern on Wednesday in order maintain the competitiveness of its currency and keep local savings attractive.

Bahrain also put up their benchmark rates shortly after the widely anticipated Fed decision to lift the federal funds rate target range to 1.5 percent to 1.75 percent in a unanimous 8-0 vote.

Gulf Arab central banks that peg their currency to the dollar 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 raised its overnight deposit rate by 25 basis points to 1.75 percent and its one-week deposit facility rate by a quarter point to 2 percent.

Saudi Arabia did not announce a move after pre-emptively increasing its benchmark repo rate last week for the first time since 2009.