RIYADH, March 26: Saudi Arabia hiked a key interest rate to 3.0 per cent on Saturday, effectively raising rates by nearly half a per cent in a move bankers said could be aimed at curbing surging money supply in the giant oil exporter. Saturday’s repo rate increase followed two smaller raises last week in the wake of the United States’ quarter percentage point rise and has widened the spread between Saudi and US rates to 0.25 percentage points. “Money growth has been so strong in Saudi Arabia they probably want to be a little more aggressive than the Fed in slowing things down,” said Samba Financial Group chief economist Brad Bourland. Saudi Arabia’s riyal is pegged to the dollar and Riyadh’s rates usually shadow those in the United States, but bankers say the spread has varied in recent years from a few basis points up to 80 or 90 basis points.
“They don’t always move in lock-step,” Bourland said.
The Saudi Arabian Monetary Agency, the central bank, raised its repo rate on Wednesday by eight basis points to 2.66pc, a day after the US raised rates a quarter percentage point to 2.75pc. SAMA nudged the rate up to 2.67 on Thursday before hiking to 3.0pc on Saturday, bankers said.
The world’s biggest oil exporter is riding an economic boom fuelled by high crude oil prices and sustained high production levels. Government revenues and corporate profits have soared as cash pours into the kingdom.
Latest SAMA figures show M3 money supply rose 17pc in the year to December, hitting 482.4 billion riyals ($128.6bn). Bank claims on the private sector rose 37 per cent to 313.93 billion riyals in the same period.—Reuters
