Saudi Arabia Hiked the Rate by 25 bps Following Fed
Saudi Central Bank (SAMA) hiked both its repo rate to 4.50% and its reverse repo rate to 4.00% on September 16, following the Fed’s move to lift the federal funds target range up to 3.75%–4.00%. The decision came one day after the CPI announcement by GASTAT as the inflation kept constant at 1.8% in August for the fourth-straight month.
Bottom Line Up Front (BLUF): Saudi Central Bank (SAMA) hiked both its repo rate to 4.50% and its reverse repo rate to 4.00% on September 16, following the Fed’s move to lift the federal funds target range up to 3.75%–4.00%. The decision came one day after the CPI announcement by GASTAT as the inflation kept constant at 1.8% in August for the fourth-straight month. Barring any escalation in the Iran conflict or disruptions to main trade routes for Saudi Arabia, both of which fall outside our baseline expectations, we anticipate that inflation will stay at a moderate level through Q4, and we now expect another 25 bps hike by SAMA in Q4 mirroring Fed, as a majority of FOMC members recently projected another hike this year due to surges in the U.S. inflation.
Figure 1: CPI, Core Inflation (YoY, % Change) and Policy Rate (%), September 2024 – September 2026
Source: IslamicMacro
Saudi Central Bank (SAMA) hiked both its repo rate to 4.50% and its reverse repo rate to 4.00% on September 16, following the Fed’s move to lift the federal funds target range up to 3.75%–4.00%. The decision came one day after the August CPI announcement by GASTAT. (Note: After hitting 1.8% annually in July, Saudi Arabia’s inflation stayed constant at 1.8% in August. Inflation was primarily driven by a 3.9% y/y rise in housing expenses, a 1.4% increase in food and beverage prices, and a 2% jump in transportation costs).
SAMA’s MPC statement on September 16 underlined that this decision is in line with SAMA's mandate of preserving monetary stability showing the regulator’s determination to keep the economy stable during the course of regional turbulences. Despite this, we feel the inflation has continued to face upward pressure following June 2026, driven in part by supply chain problems and fluctuations in the Saudi riyal while Saudi Arabia's currency peg to the U.S. dollar (USD) is largely shielding the domestic economy from imported depreciation and helping anchor consumer prices.
Barring any escalation in the Iran conflict or disruptions to main trade routes for Saudi Arabia, both of which fall outside our baseline expectations, we anticipate that inflation will stay at a moderate level through Q4, and we expect another 25 bps hike by SAMA in Q4 mirroring Fed, as a majority of FOMC members recently projected another hike this year due to surges in the U.S. inflation.
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Analyst / Author Declaration: I, Volkan Sezgin, Independent Analyst and Researcher, declare that the views and conclusions expressed in this publication reflect my professional judgment at the time of publication and are presented in good faith. The analysis has been prepared independently and without improper influence or inducement. Where applicable, material conflicts of interest are disclosed. I observe applicable professional and internal compliance standards concerning confidentiality, independence and the responsible use of information.