Fed keeps interest rates unchanged, Gulf Central Banks follow suit

Rates held at 22-year high
Fed keeps interest rates unchanged, Gulf Central Banks follow suit
The Federal Reserve was anticipated to maintain interest rates at their current level.

The Federal Reserve (Fed) was anticipated to maintain interest rates at their current level, the highest in 22 years. However, in a recent policy statement, the Fed indicated the possibility of raising borrowing costs in the future, while also recognizing the robustness of the U.S. economy.

Read more: Market eyes Wednesday’s Fed meeting amid expectations of interest rate stability

All members of the Federal Open Market Committee (FOMC) reached a unanimous decision to maintain the key federal funds rate within a target range of 5.25 percent to 5.5 percent.

For the second consecutive meeting, the committee opted to maintain the current interest rates, which marks a total of 11 increases, including four implemented in 2023.

At a press conference, Fed Chair Jerome Powell cautioned that the Fed’s campaign to bring down price growth has “a long way to go” as it left the door open to further rate hikes. He also emphasized that the Central Bank had not yet made any decisions regarding its upcoming December meeting.

He expressed that the committee will consistently act in accordance with what it deems appropriate in the given circumstances.

He clarified that a few months of positive data merely mark the initial phase, and it is essential to gain confidence that inflation is steadily moving towards a sustainable decrease in alignment with the desired target.

He continued by stating that activity in the residential sector was weakening after its increase during the summer, attributing it to the rise in mortgage rates.

Significant concerns

While it is indeed true that all indicators validate the resilience of the U.S. economy, which has managed to withstand high interest rates without slipping into a recession, there are lingering concerns. These concerns stem from the Fed’s persistence to persist with elevated interest rates until the 2 percent inflation target is attained. Such a stance raises apprehensions both within the U.S. and internationally.

Within the U.S., the imposition of high interest rates exerts significant pressure on companies, individuals, and even the government itself. This diminishes the capacity of businesses to grow and places individuals under heightened financial strain and debt burdens. Simultaneously, the cost of government debt escalates in an unprecedented manner.

In relation to countries beyond the borders of the U.S., there exists a shared endeavor to regulate interest rates with the aim of averting the exodus of investments and speculative capital. Numerous nations are currently contending with the far-reaching consequences of this scenario in various sectors. Consequently, it becomes crucial to initiate a transformative cycle that originates from the states.

Consumer confidence on decline

According to recent economic data released on Tuesday, consumer confidence in the U.S. saw a successive decline last October, reaching its lowest point in 5 months. This decline can be attributed to negative expectations regarding economic activity and concerns over potential price hikes.

According to revised data, Bloomberg reported that the Conference Board’s Consumer Confidence Index dropped to 102.6 points in October, down from 104.3 points in September.

Simultaneously, the sub-index measuring confidence in current economic conditions experienced a decline to 143.1 points, marking its lowest level in approximately a year. Additionally, the index gauging consumer expectations for the next six months also saw a decrease to its lowest point in 5 months. Conversely, the index measuring inflation expectations showed an increase.

Gulf Central Banks

The Central Banks in the Gulf region have opted to maintain unchanged interest rates, in tandem with the decision of the Fed to keep rates steady.

The Central Bank of the UAE (CBUAE) has declared that the base rate on overnight deposit facilities will remain unaltered at 5.40 percent.

Meanwhile, the Qatar Central Bank (QCB) has also announced its decision to maintain the deposit interest rates, lending interest rates, and repurchase interest rates at 5.75 percent, 6.25 percent, and 6 percent, respectively.

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