CBO raises interest rates by 75 basis points

The Central Bank of Oman (CBO) on Thursday increased the interest rate on repurchases of local banks by the same increase approved by the US Federal Reserve, which is 75 basis points, to become 4.50 percent.

Central banks of the UAE, Qatar, and Bahrain raised their benchmark rates by varying amounts to maintain their currencies pegs to the US dollar.

• The Central Bank of UAE raised its base rate on overnight deposits by 75 bps to 3.9%.

The Saudi Central Bank, also known as SAMA, lifted its repo and reverse repo rates by 75 bps to 4.5% and 4%, respectively.

• Qatar's central bank increased its lending rate by 50 bps to 5%; deposit rate and repo rate by 75 bps to 4.5% and 4.75% respectively.

• The Central Bank of Bahrain raised its key policy rate on its one-week deposit facility by 75 bps to 4.75%. The bank also raised the overnight deposit rate from 3.75% to 4.50%, the four-week deposit rate from 4.75% to 5.50%, and the lending rate from 5.25% to 6%.

The US Federal Reserve on Wednesday announced its widely expected decision to raise interest rates by another 75basis points. Citing efforts to achieve maximum employment and inflation at the rate of two percent over the longer run, the Fed announced its decision to raise the target range for the federal funds rate to 3.75-4%.

The Fed also said that ongoing increases in rates will be"appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time."

However, the central bank noted that future rate hikes will "take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments."

The change in the language from the Fed comes following recent reports some officials are becoming increasingly uneasy about the space of interest rate increases and their impact on the economy. "In assessing the appropriate stance of monetary policy, the committee will continue to monitor the implications of incoming information for the economic outlook," the Fed said. The central bank added: "The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals."

The Fed also said it will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities.

Asian markets sank Thursday after the Federal Reserve hiked interest rates and boss Jerome Powell suggested they would go higher than expected, blowing a hole in hopes for a more dovish pivot in its fight against inflation. Equities have rallied for more than a week on speculation the US central bank would join others in tamping down its monetary-tightening campaign as the economy showed signs of slowing.

Scott Rundell, Mutual Ltd, said. "There's a lot of volatility still ahead." Hong Kong led the losses as traders gave back a chunk of the previous two days' gains that came on the back of speculation China was planning to roll back some of its painful zero-Covid policies. Adding to the selling was confirmation from Beijing's health authority that it intended to stick to the strategy. Shanghai, Sydney, Seoul, Wellington, Taipei, Manila and Jakarta were also well in the red. Tokyo was closed for a holiday.

The Bank of England is widely expected to hike its key interest rate on Thursday by the biggest amount since 1989 as it bids to cool sky-high British inflation.

Following a regular meeting, the BoE is seen lifting borrowing costs by 0.75 percentage points to three percent, according to market consensus, which would be the highest level since the 2008 global financial crisis. Some analysts, however, are predicting a rise of one percentage point, also a 33-year high.

The move would mirror aggressive rate-tightening by central banks worldwide as economies battle the highest prices in decades. The US Federal Reserve on Wednesday announced a fourth consecutive hike of 0.75 percentage points, taking its benchmark lending rate to 3.75-4.0 percent. While calling further interest rate increases "appropriate" to tamp down inflation, the Fed also opened the door to smaller hikes. The Bank of England started raising rates last December and another hike Thursday would be the eighth increase in a row. Ruth Gregory, the senior UK economist at Capital Economics, predicts that the BoE will raise its interest rate by one percentage point on Thursday and by the same amount in December. "If we are right that domestic inflation will be sticky, it may mean that the Bank of England ultimately has to act more aggressively further ahead," she added.