World Economy

Central Bank Assurance Calms Qatar Money Rates

Central Bank Assurance Calms Qatar Money RatesCentral Bank Assurance Calms Qatar Money Rates

Short-term Qatari money rates fell back on Sunday after the central bank governor signaled monetary conditions would not tighten and said Qatar would not follow the United States in hiking interest rates.

On Thursday Qatar’s three-month interbank offered rate unexpectedly jumped to 1.25%, its highest level this year, from 1.19%. Yields surged at the central bank’s monthly treasury bill sale, where the bank sold half the amount of bills that it had originally planned, Gulf News reported.

Commercial bankers attributed the smaller T-bill sale at least partly to low oil and gas prices, which are beginning to reduce liquidity in banking systems around Persian Gulf Arab states. Upward pressure on rates could increase if the US Federal Reserve starts tightening monetary policy in coming months.

But Qatari money markets became calmer on Sunday, with the three-month interbank offered rate easing back to 1.20%.

Central bank chief Shaikh Abdullah Bin Saud al Thani said on Saturday that liquidity in the markets remained strong and that he saw no reason to imitate any US rate hike, despite the riyal’s peg to the US dollar.

“Current conditions in the Qatari banking system, which are characterized by rising liquidity, and the liquidity ratio set by the central bank for local banks rule out a local interest rate hike if one is decided in the US,” he said.

A Persian Gulf Arab commercial banker, speaking on condition of anonymity as the matter was sensitive, said the central bank’s signal that it did not want to see money rates rise had, for now at least, reduced traders’ incentive to test rates at higher levels.

“The prospect that Qatar would be less inclined to raise interest rates following the US is supporting money markets,” he said.

Nevertheless, he said market rates might still come under pressure again in coming weeks or months, given the possibility that the government would issue more debt domestically to fund big infrastructure projects. A month ago, the government issued 15 billion riyals ($4.1 billion) of debt.

“Market talk of more bond issuance by Qatar this quarter will keep markets edgy,” he predicted.