UAE, Saudi Arabia, Bahrain and Kuwait have all followed the US Federal Reserve decision to hike its interest rates and raised their respective rates.
The Federal Reserve hiked interest rates for the first time in nine years on Wednesday, signalling faith that the US economy had largely overcome the wounds of the 2007-2009 financial crisis.
The decision locally to increase the rates comes despite the continued decline oil prices and forecasts of a sluggish economic growth.
The UAE central bank said on Thursday it decided to raise the interest rate on its certificates of deposits by 25 basis points, effective immediately.
Certificates of Deposit are the monetary policy instrument used by the UAE central bank through which changes in interest rates are transmitted.
The UAE rate hike follows interest rate rises of a quarter of a percentage point by the central banks of Saudi Arabia, Kuwait and Bahrain.
Saudi Arabia's central bank raised its benchmark reverse repurchase rate by 25 basis points to 50 basis points, state news agency SPA reported.
The Saudi Arabian Monetary Agency (SAMA) left the repo rate unchanged, SPA said. It cited SAMA as saying the decision, which takes effect immediately, came in light of developments in local and international financial markets.
Bahrain's central bank said it had decided to raise the interest rate on its overnight deposit facility, its key policy interest rate, to 0.50 percent from 0.25 percent with immediate effect.
The rate on its one-week deposit facility was raised to 0.75 percent from 0.50 percent, while the central bank said it was keeping its repo and lending rates at 2.25 percent.
Kuwait's central bank decided to raise its discount rate by 0.25 percent to 2.25 percent, state news agency KUNA reported.
The central bank said the decision would come into effect from Thursday. KUNA cited the central bank governor as saying the decision to raise the rate was to guarantee the currency's competitiveness and attractiveness.