Monetary tightening stepped up

A majority of central banks in the region hiked interest rates over the past month. In the Gulf, central banks raised interest rates in line with the Federal Reserve, although this won’t necessarily curb demand in the region. Credit growth tends to strengthen during periods of high oil prices. Elsewhere, central banks in Egypt and Tunisia raised interest rates by 200bp and 75bp respectively this month with officials pinning the moves on stronger inflation. But we think that policymakers also have one eye on shoring up deteriorating balance of payments positions and easing pressure on their respective currencies. Further monetary tightening is likely in both countries.