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Central Banks in the Gulf region, including the UAE, Saudi Arabia, Oman, and Bahrain, have raised interest rates by 25 basis points following the U.S. Federal Reserve's decision to increase rates for the first time since 2023. This move aims to curb inflationary pressures and rising energy prices. These steps are part of efforts to maintain monetary and financial stability, given that the currencies of Gulf countries are pegged to the U.S. dollar, making the Fed's decision indicative of the region’s monetary policy direction. The rate hikes included adjustments to the repo rate and deposit rates, with the goal of maintaining currency stability and curbing undesirable capital flows, especially as inflation reached 3.4% in August and oil and gasoline prices surged due to geopolitical developments.
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