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UAE, Saudi Arabia, Bahrain follow US with rate hikes; Kuwait holds steady

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UAE, Saudi Arabia, Bahrain follow US with rate hikes; Kuwait holds steady

Three Persian Gulf oil exporters followed the U.S. Federal Reserve's interest rate hike with their own increases on Dec. 13, while one kept its rates unchanged.

Saudi Arabia raised its reverse repo rate from 125 basis points to 150 basis points with immediate effect, while the repo rate remained unchanged at 200 basis points, the Saudi Arabian Monetary Authority announced.

The Central Bank of Bahrain boosted its key policy interest rates on four of its facilities by 25 basis points each, effective immediately. The one-week deposit facility rate is now at 1.75%, the overnight deposit rate is 1.50%, the one-month deposit rate is 2.40% and the lending rate is 3.50%.

Elsewhere, the Central Bank of the United Arab Emirates announced that, effective Dec. 14, it will raise the repo rate applicable to the issuance of its Certificates of Deposit by 25 basis points to 1.75%.

Meanwhile, the Central Bank of Kuwait maintained its discount rate at the current level of 2.75%. The bank also left the policy rates unchanged after the Fed's June increase, but it followed the lead with its own increases the previous three times since December 2015.

The central bank made the decision "to consolidate an atmosphere conducive to the recovery of economic growth rate," it said in a statement, according to Reuters.

Kuwait's economy is expected contract by 2.1% in 2017, the news wire added, citing the International Monetary Fund. While the shrinkage is largely due to global agreement on oil output cuts, Reuters noted, it also reflected a sluggish private sector.

The central bank's governor, Mohammad al-Hashel, said in October that he took two factors under consideration while making interest rate decisions — Kuwaiti banks' interest rate margins and dinar deposit rate spreads with U.S. dollar deposits, the news agency said.

The country's 3.5% annual trade surplus expansion to 1.43 billion dinars in the third quarter helped the spread of the three-month Kuwait interbank offered rate over the U.S. dollar London interbank offered rate narrow to just 18 basis points from 69 basis points at the start of 2017, Reuters added.

As of Dec. 13, US$1 was equivalent to 0.30 Kuwaiti dinar.