Agencies: In an expected move, the US Federal Reserve raised the main interest rate by half a percentage point on Wednesday to confront the highest inflation rates recorded in the United States in four decades, and in the largest increase in 22 years, raising questions about the implications of the decision on the countries of the region?

The Emirati economic expert, Mohamed Al-Muhairi, says that the purpose of the decision is to confront inflation and reduce it, confirming that the prices of goods will gradually decrease in some countries.

He added to "Al-Hurra" website that "liquidity will move towards deposits" and that the countries of the region will witness "mass reluctance to invest," pointing out that the movement of gold will also be affected by this decision, either growth or decline.

Al-Muhairi praised the US Federal Reserve decision, confirming that if it had not been taken, the world would have witnessed an "economic bubble," leading to a massive global financial crisis, as happened previously in 2008.

On the other hand, the Egyptian economic expert, Abdelnaby Abdelmotaleb, said that the American decision will lead to an increase in the costs of obtaining funds for production, operation, and investment, causing an increase in the prices of goods and services in some countries.

He added to Al-Hurra website: "I believe that governments may be able to reduce the potential negative consequences by providing low-cost financing for vital projects and small and micro projects."

He pointed to the possibility of regional governments contributing to providing some production elements at good prices, in addition to taking economic measures to ensure that chaos does not occur in the markets.

The impact of the decision on Egypt

Regarding the impact of the decision on the countries of the region, the Egyptian economic expert says that central banks will be forced to offer incentives to ensure that foreign investments in debt instruments do not exit.

He added that countries like Egypt, Tunisia, and Sudan will take such measures urgently.

He continued, saying: "The Central Bank of Egypt and other central banks in the region will definitely tend to raise interest rates."

He pointed out that these countries will tend to provide more incentives and take tough measures to prevent the exit of "hot money" from them.

However, the Emirati economic expert disagreed with the previous opinion, confirming that "Egypt will not be affected by the American decision."

The Emirati economic expert indicated in statements to "Al-Hurra" website that Egypt had already raised the interest rate a month ago to achieve balance in the Egyptian markets, considering that Cairo took a proactive step.

He said that the Egyptian government took that step to ensure that liquidity does not leave the market, and that this liquidity moves towards the banks, and also to slow down the pace of economic growth.

Earlier, Egypt raised the main interest rates by 100 basis points, i.e., 1 percent, in an extraordinary meeting of the Monetary Policy Committee.

By the end of the second quarter of the current fiscal year 2021/2022, the Central Bank of Egypt announced the increase of the country's external debt to 145.529 billion dollars.

Cairo suffers from rising prices of basic commodities and the repercussions of Russia's invasion of Ukraine, and has resorted again to the International Monetary Fund to obtain financial support.

Turkish Industries

As for Turkey, it suffers from the worst economic crisis in two decades, and the Turkish Statistical Agency revealed the highest increase in producer prices since March 1995, in an early indicator of inflation, according to Bloomberg Agency.

According to Bloomberg, consumer inflation rose to 70% annually during the same period.

The Turkish lira lost about a tenth of its value against the dollar this year, amid expectations of further losses in the Turkish currency’s value.

The Central Bank of Turkey has kept interest rates unchanged for four consecutive months this year and will hold a meeting to discuss the next interest rate on May 26.

Commenting on the possible implications of the decision on Turkey, the Egyptian economic expert, Abdelnaby Abdelmotaleb, said that "Turkey still insists on not raising interest rates despite the inflation rate reaching 70%," considering that this policy has "different calculations."

Meanwhile, the Emirati economic expert, Mohamed Al-Muhairi, pointed out that the decision will affect industrial countries including Turkey, because it relies on industry that always needs bank loans.

Al-Muhairi expected a decline in the industrial pace in Turkey, but on the other hand considered that service prices "will see a noticeable improvement."

Gulf Countries

Following the US Federal Reserve decision, the Gulf countries took similar rapid steps.

The Saudi Central Bank announced raising the Repo rate by 0.5% from 1.25% to 1.75%.

The Saudi Central Bank also raised the Reverse Repo rate by 0.5% from 0.75% to 1.25%.

The Central Bank of the UAE announced an increase in the benchmark interest rate by 50 basis points starting Thursday.

The UAE Central Bank decided to keep the rate applied to short-term liquidity borrowing from the central bank through all existing credit facilities at 50 basis points above the base rate.

The Central Bank of Kuwait raised the discount rate by a quarter percentage point, from 1.75% to 2.00%, effective from May 5.

The Central Bank of Bahrain announced raising the basic interest rate for one-week deposits by 50 basis points to 1.75%.

The Qatar Central Bank decided to raise the deposit interest rate by 50 basis points to 1.50% and the lending interest rate by 25 basis points to 2.75%.

Abdelnaby Abdelmotaleb described the steps of the Gulf central banks as "appropriate." The Egyptian economic expert said these banks took these steps to ensure that money does not leave the Gulf banking system under the lure of the US Federal Reserve raising the interest rate.

The Emirati economic expert attributed the decision of most central banks in the Gulf countries to follow the US Federal Reserve's move to the fact that their economies are directly tied to the dollar.

He continued: "We will not see an active investment movement as before, but there will be no economic recession."

He confirmed that the repercussions of the decision will include "those intending to borrow" due to the rise in the interest rate. He explained that if banks previously lent at 3%, lending after this decision will be at an interest rate estimated at 3.5%, which is an increase "not frightening."

He continued: "The increase in the interest rate will affect giant and large projects and some emerging factories, but the decision will not affect small projects."

He elaborated: "Those who intend to borrow long-term will suffer as a result of this decision, especially those with variable interest loans, but borrowers with fixed interest rates will not be affected by the decision."

He pointed to the possibility that some new emerging factories may temporarily stop production to overcome the potential effects of the interest rate hike.