The central banks of the UAE, Saudi Arabia and Bahrain raised their benchmark borrowing rates after the US Federal Reserve raised its key interest rate at a more moderate level in its first policy decision of the year.
The Fed increased the policy rate by 25 basis points as it continues to push to bring inflation down towards its target range of 2 per cent and restore price stability.
This is the eighth rate increase and the smallest in the federal funds target rate range since the US central bank started raising rates last March, which included half and three-quarter point rate increases. It also pushes rates in the US to their highest since the 2008 financial crisis.
The world's largest economy is now expected to avoid sliding into a recession in 2023 as inflation has eased and companies have cut thousands of jobs in 2022 and at the start of this year, helping to cool the job market and reduce prices.
On Tuesday, the US Labour Department's employment cost index showed that inflation continued to outpace wage growth in most US cities.
Annually, wages and salaries rose by 5.1 per cent in the 12 months through December, compared with an annual inflation rate of 6.5 per cent in December.
While inflation eased from 7.1 per cent in November, the Fed could continue to raise interest rates further.
“Ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 per cent over time,” the Federal Open Market Committee said.
“In determining the extent of future increases in the target range, the committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
Most central banks in the GCC follow the Fed's policy rate moves due to their currencies being pegged to the US dollar. Kuwait is an exception in the six-member economic bloc as its dinar is linked to a basket of currencies.
The Saudi Central Bank, better known as Sama, raised its repurchase agreement (repo) rate by a quarter-point to 5.25 per cent and its reverse repo rate by a similar margin to 4.75 per cent.
The kingdom's inflation rate for 2022 was estimated at 2.6 per cent and, according to preliminary forecasts, has been forecast at 2.1 per cent in 2023, Saudi Finance Minister Mohammed Al Jadaan said in December.
The UAE Central Bank raised its base rate for the overnight deposit facility (ODF) by a quarter of a percentage point to 4.65 per cent, from 4.4 per cent, effective from Thursday.
It maintained the rate applicable to borrowing short-term liquidity from the regulator through all standing credit facilities at 50 bps above the base rate, the regulator said on Wednesday.
The base rate, which is anchored to the Fed's interest on reserve balances (IORB), signals the general stance of the UAE Central Bank’s monetary policy and provides an effective interest rate floor for overnight money market rates.
Inflation in the Emirates — stoked by increasing energy prices, imported inflation and rising employment — was projected at 4.9 per cent in 2022, according to the Central Bank's Quarterly Economic Review 2022.
That compares with a global inflation rate of 8.8 per cent, according to the International Monetary Fund.
The Central Bank of Bahrain increased its key rate on one-week deposits by 25 bps to to 5.5 per cent “in light of the development of the international financial market and … to ensure the smooth functioning of the money markets in the kingdom”.
The Bahraini regulator also raised its interest rate on overnight deposits by a quarter-point to 5.25 per cent, and by a similar margin on its four-week deposit rate, raising it to 6.25 per cent. The lending rates were also increased by 25 bps to 6.75 per cent.
The Central Bank of Qatar decided to maintain its repo rate at 5.25 per cent. It also kept its deposit rate at 5 per cent and the lending rate at 5.5 per cent.
Last week, the Central Bank of Kuwait increased its discount rate by half a percentage point to 4 per cent effective January 26, 2023.
“This decision came in light of recent … local and international economic conditions, local monitory and banking indicators, and movements on Kuwaiti dinar interest rate in the local market, considering the changes to the interest rates on the other major currencies,” Governor Basel Al Haroon said.
“The decision also considered the various factors affecting the consumer price index to identify the factors that put pressure on prices, in view of the nature of the Kuwaiti economy's openness to the world.”
Inflation in GCC economies remained lower than the global average, benefitting from fixed exchange rates and fuel subsidies, according to the World Bank.
Global inflation is forecast to fall to 6.6 per cent in 2023 and 4.3 per cent in 2024, according to the IMF's latest forecast.
Higher oil prices and Russia's war in Ukraine exacerbated inflation in 2022.
A strong US dollar also increased the price of imports and food costs globally last year, but the currency started to depreciate in September, which is expected to help in easing inflationary pressures further in 2023.
Mena economies — which expanded by an estimated 5.7 per cent in 2022, their highest in a decade, owing to a rise in energy revenue — are projected to decelerate to 3.5 per cent in 2023 and to 2.7 per cent in 2024, according to the World Bank.
GCC economies are projected to have grown 6.9 per cent in 2022, on the back of high oil prices and higher growth rates in non-oil sectors.
Growth in GCC countries is expected to slow to 3.7 per cent in 2023 and 2.4 per cent in 2024, owing to lower oil prices.
Crude prices, which surged to a 14-year high of about $140 a barrel in March following the outbreak of the Ukraine war, are projected to fall about 16 per cent this year, according to the IMF.
They are expected to moderate to an average of $88 a barrel in 2023, primarily due to slower global growth, according to the World Bank. The IMF forecasts an average of $81.13 a barrel in 2023 and $75.36 in 2024.
Despite last year's global headwinds, the economy of the Emirates is projected to have expanded by an annual 7.6 per cent in 2022, after growing 3.8 per cent in 2021, according to the UAE Central Bank.
This marks the strongest annual expansion by the Arab world's second largest economy since 2011, propelled by higher oil prices, a robust property sector and an increase in travel and tourism that underpinned a solid rebound from the coronavirus-induced slowdown.
Advanced economies will have a more pronounced slowdown, with growth set to decline to 1.2 per cent in 2023 and 1.4 per cent in 2024, from 2.7 per cent last year and 5.2 per cent in 2021.
Nine in 10 advanced economies are expected to decelerate this year.
The US, the biggest of the group, is forecast to expand 1.4 per cent in 2023, instead of the previously estimated 1.6 per cent and down from 2 per cent last year and 5.7 per cent in 2021.
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Tips for job-seekers
- Do not submit your application through the Easy Apply button on LinkedIn. Employers receive between 600 and 800 replies for each job advert on the platform. If you are the right fit for a job, connect to a relevant person in the company on LinkedIn and send them a direct message.
- Make sure you are an exact fit for the job advertised. If you are an HR manager with five years’ experience in retail and the job requires a similar candidate with five years’ experience in consumer, you should apply. But if you have no experience in HR, do not apply for the job.
David Mackenzie, founder of recruitment agency Mackenzie Jones Middle East
TECH%20SPECS%3A%20APPLE%20IPHONE%2014%20PLUS
%3Cp%3E%3Cstrong%3EDisplay%3A%3C%2Fstrong%3E%206.1%22%20Super%20Retina%20XDR%20OLED%2C%202778%20x%201284%2C%20458ppi%2C%20HDR%2C%20True%20Tone%2C%20P3%2C%201200%20nits%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EProcessor%3A%3C%2Fstrong%3E%20A15%20Bionic%2C%206-core%20CPU%2C%205-core%20GPU%2C%2016-core%20Neural%20Engine%C2%A0%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EMemory%3A%3C%2Fstrong%3E%206GB%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ECapacity%3A%3C%2Fstrong%3E%20128%2F256%2F512GB%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EPlatform%3A%3C%2Fstrong%3E%20iOS%2016%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EMain%20camera%3A%3C%2Fstrong%3E%20Dual%2012MP%20main%20(f%2F1.5)%20%2B%2012MP%20ultra-wide%20(f%2F2.4)%3B%202x%20optical%2C%205x%20digital%3B%20Photonic%20Engine%2C%20Deep%20Fusion%2C%20Smart%20HDR%204%2C%20Portrait%20Lighting%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EMain%20camera%20video%3A%3C%2Fstrong%3E%204K%20%40%2024%2F25%2F3060fps%2C%20full-HD%20%40%2025%2F30%2F60fps%2C%20HD%20%40%2030fps%3B%20HD%20slo-mo%20%40%20120%2F240fps%3B%20night%2C%20time%20lapse%2C%20cinematic%2C%20action%20modes%3B%20Dolby%20Vision%2C%204K%20HDR%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EFront%20camera%3A%3C%2Fstrong%3E%2012MP%20TrueDepth%20(f%2F1.9)%2C%20Photonic%20Engine%2C%20Deep%20Fusion%2C%20Smart%20HDR%204%3B%20Animoji%2C%20Memoji%3B%20Portrait%20Lighting%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EFront%20camera%20video%3A%3C%2Fstrong%3E%204K%20%40%2024%2F25%2F3060fps%2C%20full-HD%20%40%2025%2F30%2F60fps%2C%20HD%20slo-mo%20%40%20120fps%3B%20night%2C%20time%20lapse%2C%20cinematic%2C%20action%20modes%3B%20Dolby%20Vision%2C%204K%20HDR%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EBattery%3A%3C%2Fstrong%3E%204323%20mAh%2C%20up%20to%2026h%20video%2C%2020h%20streaming%20video%2C%20100h%20audio%3B%20fast%20charge%20to%2050%25%20in%2030m%3B%20MagSafe%2C%20Qi%20wireless%20charging%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EConnectivity%3A%3C%2Fstrong%3E%20Wi-Fi%2C%20Bluetooth%205.3%2C%20NFC%20(Apple%20Pay)%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EBiometrics%3A%3C%2Fstrong%3E%20Face%20ID%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EI%2FO%3A%3C%2Fstrong%3E%20Lightning%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ECards%3A%3C%2Fstrong%3E%20Dual%20eSIM%20%2F%20eSIM%20%2B%20SIM%20(US%20models%20use%20eSIMs%20only)%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EColours%3A%3C%2Fstrong%3E%20Blue%2C%20midnight%2C%20purple%2C%20starlight%2C%20Product%20Red%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EIn%20the%20box%3A%3C%2Fstrong%3E%20iPhone%2014%2C%20USB-C-to-Lightning%20cable%2C%20one%20Apple%20sticker%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EPrice%3A%3C%2Fstrong%3E%20Dh3%2C799%20%2F%20Dh4%2C199%20%2F%20Dh5%2C049%3C%2Fp%3E%0A
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
SPECS
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more from Janine di Giovanni
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Emergency phone numbers in the UAE
Estijaba – 8001717 – number to call to request coronavirus testing
Ministry of Health and Prevention – 80011111
Dubai Health Authority – 800342 – The number to book a free video or voice consultation with a doctor or connect to a local health centre
Emirates airline – 600555555
Etihad Airways – 600555666
Ambulance – 998
Knowledge and Human Development Authority – 8005432 ext. 4 for Covid-19 queries
Mountain%20Boy
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ELIO
Starring: Yonas Kibreab, Zoe Saldana, Brad Garrett
Directors: Madeline Sharafian, Domee Shi, Adrian Molina
Rating: 4/5
The specs
Engine: 2.0-litre 4-cylinder turbo
Power: 258hp from 5,000-6,500rpm
Torque: 400Nm from 1,550-4,000rpm
Transmission: Eight-speed auto
Fuel consumption: 6.1L/100km
Price: from Dh362,500
On sale: now
UAE currency: the story behind the money in your pockets
WHAT IS GRAPHENE?
It was discovered in 2004, when Russian-born Manchester scientists Andrei Geim and Kostya Novoselov were experimenting with sticky tape and graphite, the material used as lead in pencils.
Placing the tape on the graphite and peeling it, they managed to rip off thin flakes of carbon. In the beginning they got flakes consisting of many layers of graphene. But when they repeated the process many times, the flakes got thinner.
By separating the graphite fragments repeatedly, they managed to create flakes that were just one atom thick. Their experiment led to graphene being isolated for the very first time.
In 2010, Geim and Novoselov were awarded the Nobel Prize for Physics.
Nayanthara: Beyond The Fairy Tale
Starring: Nayanthara, Vignesh Shivan, Radhika Sarathkumar, Nagarjuna Akkineni
Director: Amith Krishnan
Rating: 3.5/5
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Teaching your child to save
Pre-school (three - five years)
You can’t yet talk about investing or borrowing, but introduce a “classic” money bank and start putting gifts and allowances away. When the child wants a specific toy, have them save for it and help them track their progress.
Early childhood (six - eight years)
Replace the money bank with three jars labelled ‘saving’, ‘spending’ and ‘sharing’. Have the child divide their allowance into the three jars each week and explain their choices in splitting their pocket money. A guide could be 25 per cent saving, 50 per cent spending, 25 per cent for charity and gift-giving.
Middle childhood (nine - 11 years)
Open a bank savings account and help your child establish a budget and set a savings goal. Introduce the notion of ‘paying yourself first’ by putting away savings as soon as your allowance is paid.
Young teens (12 - 14 years)
Change your child’s allowance from weekly to monthly and help them pinpoint long-range goals such as a trip, so they can start longer-term saving and find new ways to increase their saving.
Teenage (15 - 18 years)
Discuss mutual expectations about university costs and identify what they can help fund and set goals. Don’t pay for everything, so they can experience the pride of contributing.
Young adulthood (19 - 22 years)
Discuss post-graduation plans and future life goals, quantify expenses such as first apartment, work wardrobe, holidays and help them continue to save towards these goals.
* JP Morgan Private Bank
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Teaching in coronavirus times
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
The specs
Common to all models unless otherwise stated
Engine: 4-cylinder 2-litre T-GDi
0-100kph: 5.3 seconds (Elantra); 5.5 seconds (Kona); 6.1 seconds (Veloster)
Power: 276hp
Torque: 392Nm
Transmission: 6-Speed Manual/ 8-Speed Dual Clutch FWD
Price: TBC