Gulf Arab central banks followed the U.S. Federal Reserve and raised interest rates by a quarter percentage point for the first time since 2018, though higher oil revenues mean governments can spend more to cushion the impact of increasing borrowing costs.
Policymakers in countries including Saudi Arabia and the United Arab Emirates tend to match the Fed’s decisions to protect their currencies’ pegs to the U.S. dollar. While price pressures in the region aren’t as severe as in the U.S., where inflation is at the highest in four decades, the strength of the post-Covid rebound warrants monetary tightening, according to Oxford Economics.
