‎“Maaal reports .. Saudi Central Bank raises interest for 7th time in ‎‎2022‎

On Wednesday, the Saudi Central Bank decided to raise the rate of “repo” repurchase agreements by 50 basis points from 4.50% to 5%, and “SAMA” also raised the reverse repurchase agreements “reverse repo” by 50 basis points also from 4% to 4.50%, which is the seventh hike that the central bank makes during the year 2022.

The Saudi Central Bank’s decision to raise interest rates comes in line with global economic changes and the changes that occur in them, especially in the wake of the US Federal Reserve’s announcement, yesterday, to raise interest rates by 50 basis points, to the range between 4.25% and 4.50%, which is the highest level since 2007.

Report issued by Maaal newspaper showed that the Saudi Central Bank made 53 adjustments in interest rates from the beginning of the new millennium until yesterday evening, Wednesday, December 14, 2022, as the “central bank” measures varied between raising the interest rate at one time, and reducing it at other times (30 raising movements).

The decisions of “SAMA” with regard to interest rates are directly related to the decisions taken by global central banks, especially the US Federal Reserve, due to the link between the Saudi riyal and the US dollar.

The decision of the “Saudi Central Bank” to raise interest rates aims to maintain monetary stability and support the stability of the financial sector in light of monetary developments in the local and global markets.

The decisions of the “Saudi Central” this year came in agreement with the decisions to raise US interest rates, especially with the escalation of the Russian-Ukrainian crisis and the resulting economic effects at the global and local levels.

The decision of the “Saudi Central Bank” to raise the interest rate agreed with what was taken by the US Federal Reserve last March and May. The interest is lower than its US counterpart by 25 basis points. However, the measure to raise the interest rate came in line with the US Federal Reserve’s decision in July, September and November of 2022 to raise interest by 75 points, as well as in this December by 50 points.

The decision of the “Saudi Central Bank” to raise the interest rate was expected; To absorb the effects of inflation, which was less severe at the local level compared to its global and American counterparts in particular; Given the vulnerability of the advanced economies to the gas crisis and the lack of supplies resulting from the continuation of the Russian-Ukrainian war and the constant threats of escalation, which mostly affect the economies of European countries and the United States.

As for the situation in the Gulf region in general, and Saudi Arabia in particular, we will find that the matter is relatively different from its counterparts around the world, as the Kingdom and its peers in the Gulf enjoy very good oil reserves, which secures for them the issue of supplies of oil, gas and derivatives needed in economic activities, which is This reduces the repercussions of inflation and its effects on society in general

The repercussions of repeatedly raising interest rates cast varying shadows on various economic sectors. We will find that the sectors that depend on financing are affected by the high cost, including real estate, in addition to the high cost of lending, the decrease in purchasing power, and the decline in job opportunities. On the other hand, the decision will have some benefits, such as lower real estate prices and some basic commodities. In all cases, the banking sector is the biggest winner from the rise in interest rates

Despite the varying repercussions of the decision to raise interest rates on economic sectors, the matter is offset by a positive impact on global oil prices, which often witness a rise after each process of raising interest rates globally, and therefore it is expected that this will drive government trends in the Kingdom. To continue adopting plans that invest more in infrastructure and diversifying the economy, which will reduce any negative reflection of the decision to raise interest rates.

As for the repercussions of the “Saudi Central” decision to raise interest rates on the performance of the financial market, the stock market is supposed to interact positively with the decision, which is what happened to “TASI” at the beginning of the second hour of trading; to rise by 0.06% at the level of 10254.67 points, winning 6.55 points.

Despite the market’s ups and downs and the movement’s variation, positively or negatively, with the decision of the “Saudi Central Bank” regarding interest rates over the past years, it cannot be certain that the decision to move the interest rate up and down is the only driver of market performance, as there are other factors that affect this. Performance such as those related to the results of the companies’ business, as is the case now, in addition to the deals and projects that are announced, and the economic decisions of the government, as well as the psychological factors associated with traders and the mechanism of their dealing with what is going on around them in terms of influences that affect the investment decision in a way cannot be overlooked.