Riyadh – Mubasher: The Saudi Arabian Monetary Authority (SAMA) is expected to increase its reverse repo policy rate by 0.50% points in 2017 to mirror the anticipated Federal Funds rate hike, Jadwa Investment reported.
The research firms however said that it does not expect that this hike will have a material impact on liquidity levels, deposit growth, or significant movements in market rates.
After raiding the US rate, many emerging markets will be running the risk of having to raise interest rates in order to maintain a strong currency, and limit the impact of potential currency crises, Jadwa added.
In December, SAMA increased its reverse repo policy rate by 25 base points (bps) to 0.75%, which is considered its second increase since 2008, mirroring the hikes in the US.
Jadwa Investment expected that fiscal deficit will continue in 2017, with financing through a combination of reserve withdrawals and domestic and international sovereign bond issuances to persist.
However, the report noted that the deficit rate next year will be narrower than this year.
"The surge in net capital outflows that pushed down FX reserves at the beginning of 2016 moderated in the second and third quarters of 2016, mainly due to an improvement in both the current account and the non-reserve financial account," the report said.
