GCC RE­ACTS TO FED IN­TER­EST HIKES

Qatar Today - - BUSINESS -

The Fed­eral Re­serve raised in­ter­est rates for the first time in nearly a decade from a range of 0% to 0.25% to a range of 0.25% to 0.5%, prompt­ing dif­fer­ent re­ac­tions from the GCC cen­tral banks.

While the up­dated Qatar Eco­nomic Out­look 2015-2017 pre­dicts that do­mes­tic in­ter­est rates in Qatar are likely to rise dur­ing this pe­riod due to in­creas­ing fund­ing re­quire­ments of govern­ment and the com­mer­cial banks and “ac­cen­tu­ated” by the US Fed lift-off, Qatar Cen­tral Bank (QCB) didn't im­me­di­ately change its in­ter­est rates in re­sponse to the Fed hike, in line with what QCB gov­er­nor Sheikh Ab­dulla bin Saud Al Thani had pre­vi­ously stated. An­a­lysts have spec­u­lated that since QCB did not cut rates to the same level as the Fed af­ter the 2008 fi­nan­cial cri­sis, it would not have to raise rates as quickly.

How­ever, sev­eral Gulf na­tions raised in­ter­est rates within a few hours af­ter the Fed an­nounced its hike, with Saudi Ara­bia the first to make the move, fol­lowed by Kuwait, Bahrain and fi­nally the United Arab Emi­rates, who all hiked in­ter­est by one-quar­ter of a per­cent­age point. All th­ese cur­ren­cies are pegged to the dol­lar and the raised rates may even­tu­ally lead to higher loan costs and tighter liq­uid­ity.

For Qatar too the in­crease in rates is in­evitable ac­cord­ing to the Min­istry of De­vel­op­ment Plan­ning and Sta­tis­tics. “Over the out­look pe­riod, and in cir­cum­stances where oil and gas rev­enues have ebbed and pub­lic sec­tor de­posits in the com­mer­cial bank­ing sys­tem have fallen, do­mes­tic in­ter­est rates are likely to feel up­ward pres­sure from ris­ing fund­ing needs of govern­ment and the com­mer­cial bank­ing sys­tem, which must now com­ply with tighter reg­u­la­tory stan­dards,” it said.

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