In a recent move, the Saudi Arabian Monetary Agency (SAMA) lifted the interest rates on the Saudi riyal significantly above the hike in the US dollar Federal Reserve rates, and widened the spread between the riyal and the dollar interest rates by 50 basis points. SAMA’s aim was to keep a lid on the price pressures building in the economy and contain hyper inflation.
However, under the fixed peg of the riyal to the US dollar, monetary policy tools, especially interest rates, remain of limited use and hardly help the Saudi monetary system to keep high prices contained.
