RIYADH (Reuters) – The Saudi central bank confirmed on Saturday it had raised interest rates by 30 basis points but declined to give a reason.
“Yes, it’s correct,” an official said when asked if the bank had hiked rates.
On Thursday, currency traders said the bank had unexpectedly tightened monetary policy, narrowing the gap with U.S. interest rates for the first time since a stock market crash began last year.
They said the Saudi Arabian Monetary Agency (SAMA), the Saudi central bank, raised the benchmark repo rate and the reverse repo rate by 30 basis points to 5.50 percent and 5 percent respectively, four traders in Riyadh and Dubai said, citing a memo sent to Saudi banks.
SAMA, which keeps the riyal pegged to the dollar, was making up ground lost in 2006 when it declined to match the U.S. Federal Reserve’s interest rate increases during a Saudi stock market crash that began in February, traders and analysts said.
Most Gulf central banks move in tandem with the Fed to maintain their currency’s yield appeal.
Saudi Arabia, the world’s top oil exporter, and five other Gulf Arab states have pegged their exchange rates to the dollar in the run-up to a planned monetary union, possibly around 2010.