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Saudi Arabia raises rates to 4.25 pc

RIYADH — Saudi Arabia’s central bank raised its benchmark repo rate by 25 basis points to 4.25 per cent yesterday, bankers said. The Saudi riyal is pegged to the dollar and the Saudi Arabian Monetary Agency (SAMA), or central bank, usually moves swiftly to match changes in US rates. The US Federal Reserve raised rates by a quarter point to 3.75 per cent on Tuesday.

At the beginning of the year rates in the two countries were nearly identical. But in March SAMA lifted its repo rate 50 basis points above the Fed rate in an apparent bid to curb the impact of surging money supply in the world’s biggest oil exporter. M3, the broadest measure of money supply, has grown an annual 15.9 per cent this year as cash from soaring international oil prices flooded into the economy, data from July showed.

Like the riyal, currencies in the other five Gulf Arab states Kuwait, Qatar, Bahrain, Oman and the United Arab Emirates are pegged to the dollar. A UAE central bank official told Reuters the bank would issue a statement yesterday on the interest rate on certificates of deposit, the country’s benchmark rate.