«Central» raise interest rates on certificates of deposit

For the first time nine years and variable rates
Abu Dhabi – Abdel Fattah Montasser
Date: December 18, 2015

For the first time in more than nine years to raise the UAE Central Bank yesterday the interest rate on certificates of deposit issued by banks in the country in line with the rise in dollar interest rates after the Federal Reserve’s decision to raise the interest rate on federal funds rate by 25 basis points yesterday, the first.
He explained yesterday that the central bank certificates of deposit issued by the Central Bank for banks in the state representing the monetary policy by which the transfer of the effects of changing interest rates to the banking system in the state tool.
Revealed high-level banking sources said in remarks for «economic statement» that under this step certificates of deposit issued by the Central Bank to the banks for different maturities varying degrees prices rose ..
Where it rose to the order a week from 0.05% to 0.25% and for the month from 0.10% to 0.30% and for two months from 0.12% to 0.32% and for 3 months from 0.15% to 0.43% and for the six months from 0.22% to 0.62% and for the nine months from 0.31 % to 0.72% and for the year from 0.40% to 0.81%.
The sources expressed the belief that the return of the upward trend of interest rates on deposits would reduce inflation in general, indirectly, where central banks have resorted in most countries of the world to raise interest rates to combat rising inflation.
She stressed that despite the rate hike, but it still revolves around reasonable levels will not affect the investment lending process because it is still in the low limits ..
Stressing that it will not adversely affect the banks because the bulk of the increase in the cost of obtaining funds to be borne by the banks is offset to a large extent the increase in the lending rate although this tie will take some time when banks bear the difference resulting from the increase in interest rate.
Banking experts predicted that the coming period would witness further rise in the levels of interest rates on the dollar ..
And therefore the dirham, pointing out that the relevant US authorities are aiming to get interest rates, short-term to a point equivalent to a level that does not hamper the interest rate at which growth and inflation raises to maintain economic growth, although it is not clear where specifically located this point, but analysts in the financial industry predicted that be much higher than the current level even after the lifting.
Amjad Nasr Islamic Bachirvh expert said that with respect to the prospects of a significant effect on the investment banking sector is a result of an interest rate hike and the conversion of investments in other sectors to dollar-denominated bank deposits ..
This is not expected in the short to medium term because interest on bank deposit rate remains low compared to that exceeded at a time, several years ago 6 percent before returning the deteriorating consecutively and reached the lowest levels of about 40 years ago, making many investors, especially individuals are turning from bank deposits to invest in other sectors such as real estate sectors or stocks or other sectors.
Reda Musalam general manager of Truth, The Economic Consulting that under the dirham pegged to the dollar and due to the sale of oil in dollars it when raising interest rates on the dollar rising interest on the DRAM automatically rate, there is a strong correlation between the movement in interest rates on deposits and the performance of the stock and real estate and other sectors, market prices economic ..
If the yield in less than real estate and other banks these other non-banking sectors are more attractive investment, however, raise the interest rate does not significantly benefit the banks largely because the cost of interest on the money to be in this case on the high banks.
Borrowing rates
He pointed out that, for example, turn the competent authorities in the United States to raise the interest rate on dollar deposits up to reduce bank borrowing rates because when low interest rates, companies borrow at high rates and increase its projects and investments and thus an increase in demand for energy and otherwise occur production requirements and gradually increase inflation.
He added that it is clear that there is no negative impact of rising interest rates on lending to people where prices of the UAE Central Bank statistics show that personal loans in both its commercial and consumer witnessed over the past two years and the last period of this year great heights ..
The record rates, despite the relatively high interest rates locally, which included interest on car loans and housing loans and real estate loans rising to varying degrees from sector to sector, as well as varying rates from one bank to another of the banks operating in the country.
The experts pointed out that the central bank had decided in October 2008 not to follow the example of reducing the level of interest on the federal funds rate for the US dollar of 1.5% to 1%, and this decision is the first of its kind since the dirham pegged to the dollar.

5 years
The central bank – before the final decision – change the interest rate imitating the level of interest rates on federal funds the US dollar price of about 26 times, most recently in the eighth month of October 2008 in the wake of the global financial crisis, the index ..
In terms of reducing the UAE Central Bank interest rate on repurchase of certificates of deposit issued by banks in the country (repo) of about 2% to 1.5% for short-term deposits amounting to maturities within the month in line with the new level of the interest rate on federal funds to the dollar at the time ..
Thus, the total reduction percentage reduction in the interest rate was 3.75% has eight consecutive times in a year.
4 Gulf banks in the footsteps of «American Reserve»
4 taken decisions Gulf central banks to raise interest rates, following the Council’s decision to reserve the US, raising interest after several years of the most stringent in the history of the United States monetary policy.
As expected by many analysts and economists, the US Federal Reserve decision to take, to raise interest rates after an argument dominated the global economy, with fears a slowdown in the pace of growth for the world’s second largest economy, China’s economy.
He announced the UAE Central Bank, it is raising the interest rate applied to the deposit certificates issued as of yesterday.
It decided by the Saudi Arabian Monetary Agency to raise the rate of re-reverse repurchase agreements (reverse repo) by 25 basis points, after minutes from the Federal Reserve’s decision to raise the benchmark US interest rates.
In Kuwait, the Central Bank decided to raise the discount rate a quarter percentage point to 2.25% from 2.0%.
The Central Bank of Bahrain has decided, with immediate effect raising the interest rate on deposits basic per night from 0.25% to 0.50%. As well as the interest rate on deposits for one week by 25 basis points from 0.50% to 0.75%.
A financial analyst, club Azzam, for «direct»: The lifting of the Gulf countries for the interest rate after the adjournment of the US Federal is normal; because of the economies of the Gulf countries link the US economy because of oil and the Gulf currencies linked to the dollar.
Cash reserves
Ahmed said Maher- financial analyst at Nama Economic Consulting, in a statement to «direct»: Most central banks in the Gulf states began to interact with the resolution; in line with the global conditions. «Maher» He added that the Gulf states are generally enjoys a large financial reserves of cash and better than other countries, and that the public debt does not represent a large proportion of the gross domestic product.
He pointed out that GCC central banks to raise interest initiatives gave optimistic and confident and temporary traders, especially foreigners.
Dollar strength
Maher believes that the strength of the dollar after the decision to raise interest rates will affect the strength of US exports, and the competitiveness of manufacturing, so that will be a result of the decision of consumers better than producers.
Maher does not believe that the decision will have a negative impact on the Gulf countries and the region, adding that the world now looks to oil and oil prices, and now are looking at the dollar as a safe haven.
Commenting on the UAE central lift interest rates, Maher stressed that the UAE is spending a lot of money on infrastructure projects; thus positioned to expand the solvency base has.

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