Most Gulf countries lift key rates by a quarter of a percentage point in response to US move
Qatar may buck the trend as the Gulf's rich oil exporters hike interest rates in response to US monetary tightening, but Doha's strong financial position means its currency should escape major pressure, commercial bankers said on Thursday.
After the US Federal Reserve raised rates by 0.25 percentage point on Wednesday, the central banks of Saudi Arabia, the United Arab Emirates, Kuwait and Bahrain followed suit within 90 minutes. Oman had already allowed its official rate to drift up in recent months.
They were acting to head off any downward pressure on their currencies, which are pegged or closely linked to the US dollar.
By midday on Thursday, however, Qatar - which pegs its riyal at 3.64 to the dollar - had not announced a rate hike and had given no indication it was considering one. Central bank officials in charge of policy could not be reached for comment.
Some commercial bankers said they still expected a Qatari hike later in the day or in coming days. Central bank governor Sheikh Abdullah bin Saud al-Thani is visiting Kazakhstan, and some suggested this might have delayed Qatari decision-making.
"The expectation is that they will do it, as the others have. We'll know very soon," said the managing director of a Qatari bank, declining to be named because of political and commercial sensitivities.
Several others, however, said Qatar might see no need to follow US policy. Doha was slower than most central banks to cut rates during the global financial crisis, so it now has a relatively high official rate structure that can accommodate small rises in US rates for now.
Also, Qatar is one of the Gulf's financially strongest states; its sovereign wealth fund has several hundred billion dollars of assets that could be deployed if necessary to head off any attack on its currency.
One-year dollar/riyal forwards barely moved on Thursday morning, suggesting the uncertainty about policy was not causing banks to take many fresh positions.
"Since 2008, Qatar's monetary policy has been largely independent of the US, despite maintaining a pegged currency," said Akber Khan, director of asset management at Qatar's Al Rayan Investment.
He noted the current official overnight lending rate of 4.75 percent was only half a percentage point below its level 10 years ago.
In December 2015, after the Fed raised rates for the first time in nine years, Qatar kept its official rates flat. But Doha did imitate the US rate hike in December 2016.
"The Qataris have increasingly been looking to their own monetary policy. Even at the time of the last US hike, they had some hesitation about aligning themselves to the US and the other Gulf countries," said a treasury banker in the United Arab Emirates.
"Qatari monetary agency is not really transparent, so it is not clear what they plan to do now."