By Santhosh V. Perumal/Business Reporter

Qatar, whose currency is pegged to the dollar, may not necessarily increase the interest rates, following an anticipated lift-off by the US Federal Reserve later this year; indicating a continued soft rate regime to support economic growth and bolster corporate sector.
“We might not need to increase the interest rates based on the liquidity study and looking at our domestic environment,” Qatar Central Bank (QCB) governor Sheikh Abdulla bin Saoud al-Thani said on Thursday at a lecture series organised by the Carnegie Mellon University Qatar.
Stressing that QCB was carefully watching global developments as possible spillover from changes in the US policy rates and low oil prices; he said it will take appropriate actions, if and when, required to maintain monetary and financial stability in Qatar, where “growth continues, although at a moderate rate, despite low oil prices.”
Stressing that QCB will continue to monitor how banks are funding the private sector, where the credit has been growing in double-digit, in line with expansion in non-hydrocarbons; he said “we will continue ensuring stability in the interest rate.”
Credit to the private sector has grown more than 20% year-on-year in the second quarter of 2015 against non-hydrocarbon real gross domestic product expansion of less than 10%, the governor said in his 45-minute power point presentation.
Highlighting that the central bank's role is to support growth by maintaining low and stable inflation as well as low interest rates; he said it also has to ensure adequate flow of credit to the private sector in a cost-effective manner.
QCB's policy rates such as QMR deposit rate stands at 0.75%, QMR lending rate at 4.5% and repo rate at 4.5%. The deposit and lending rates are announced by QCB on overnight deposit and loan transactions between QCB and local banks through the Qatar Money Market Rate Standing Facility (QMR), respectively.
Qatar interbank offered rate (QIBOR) introduced in May 2012 has played an important guiding role for banks in determining interbank rates, the governor said.
During 2014, the overnight rate remained consistently below the QIBOR, reflecting comfortable surplus liquidity in the system.
He said there has been general easing of inter-bank rates, T-bill rates and interest rates on customer deposits and credit facilities and money supply was consistent with growth and inflation objectives. “Given the fixed exchange rate (with the US dollar), a complete monetary policy independence is not possible,” Sheikh Abdulla, however, said.
Asserting that “overnight rate and liquidity management are targeting”; he said QCB, which is feeling comfortable for the last two years because its various monetary policy instruments are working smoothly, will continue to monitor the situation.
“I can definitely say at this moment there is no need to do anything”, he said, indicating that there are no chances of tinkering with interest rates.
In its latest stability review report, the central bank had said despite oil price induced fall in export earnings and government revenues and the consequent moderation in government deposits in the second half, systemic liquidity was comfortable during 2014 reflecting its active liquidity management operations. In the money market, this was reflected in lower inter-bank interest rates.
QCB had said stable inflation and comfortable liquidity position has helped it maintain low interest rates in various segments of the financial market during 2014.
Highlighting that banks are well capitalised and profitable with high asset quality; he said there is comfortable liquidity in the system with QR120bn worth loanable funds. Moreover, QCB auctions QR4bn of T-bills every month with a total outstanding of QR21bn and there was also QR87.8bn of T-bonds and sukuks.