Central Bank of Bahrain raises interest rates

Manama : The Central Bank of Bahrain (CBB) yesterday announced raising its key policy interest rate, effective immediately. 

The action follows the interest rate hike announced by the US Federal Reserve. The Fed’s hike, which is also the third this year, raised the US benchmark-lending rate by “a quarter percentage point to a target range of 1.25 per cent to 1.50pc”. 

Bahrain’s central bank said it is raising its key police interest rate on the one-week deposit facility from 1.50 per cent to 1.75pc. Overnight deposit rate will be now 1.50pc instead of 1.25pc. One-month deposit rate was adjusted from 2.15pc to 2.40pc, while lending rate was raised from 3.25pc to 3.50pc. 

Central Banks of Saudi Arabia and UAE had also announced similar measures following the Fed’s decision to hike rates. 

Saudi said it is raising its reverse repo rate by 25 basis points to 1.50pc, while Saudi Arabian Monetary Authority (SAMA) said it would keep the repo rate unchanged at 200 basis points or 2pc. 

Reverse repo is the rate at which banks deposit money at the Central Bank, while repo is the rate at which banks lend money. 

The Central Bank of UAE announced a 25 basis point hike in interest rates. Its repo rate is now 1.75pc. 

Earlier announcing the rate hike, Fed Chair Janet Yellen said, “At the moment the U.S. economy is performing well. The growth that we’re seeing, it’s not based on, for example, an unsustainable buildup of debt ... The global economy is doing well, we’re in a synchronized expansion.”

In its justification for Wednesday’s rate increase, which was widely expected by financial markets, the Fed’s policy-setting committee cited “solid” economic growth and job gains.

The Fed now sees gross domestic product growing 2.5pc in 2018, up from the 2.1pc forecast in September. The pace of growth is expected to cool to 2.1pc in 2019, slightly higher than the prior forecast of 2.0pc.