The gulf region’s central bank governors recently confirmed their respective country’s commitment to peg their currencies to the dollar; this while attending a conference in Abu Dhabi.
The governor of the Saudi Arabian Monetary Authority, Ahmed Abdulkarim Alkholifey said that the policy makers of the kingdom are under much less pressure compared to a couple of years ago when the prices of oil were roughly half of what they are now.
Alkholifey said that the reason for pegging their currencies to the dollar is due to market developments particularly recent moves by the US Federal Reserve.
Mohammed Al-Hashel of Kuwait said that the countries of the Gulf region are attempting to strike a balance between keeping a constructive spread between their local currencies and the dollar thereby keeping the economy in the region stimulated.
Al-Hashel added that by joining diverse instruments of monetary policy, the bank is trying to keep the cost of borrowing at levels that do not hold back growth whereas maintaining a level of “attractiveness” in the rates of local currency deposits.
Mubarak Rashed Al Mansoori, the bank governor of the United Arab Emirates said that the UAE will match any rise in the rates by the Fed in 2018 when non-oil economic advancement is anticipated to be around 3.5% to 3.6%.
He said that regardless of the introduction of VAT recently, consumer inflation will likely stay gentle in his country.
Speaking at an earlier panel discussion, Al Mansoori noted that the UAE “learned its lesson” during the last global financial crisis. He said that the UAE is now making certain that no precise sector is too exposed to foreign capital inflows.