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Interest rate increases by the central banks of Saudi Arabia, Bahrain, and Kuwait reflect their commitment to their exchange rate pegs and are not the result of immediate market pressures, according to Fitch Ratings.

Higher policy rates will contribute to slower non-oil growth in the region, but their effect on economic activity will be minor compared with the dampening effect of lower oil prices, the ratings agency said in a statement.

“The 25 basis point rate hikes, in line with the decision of the US Federal Reserve, are consistent with our assumption that GCC central banks will seek to broadly maintain the spreads between their policy rates and the Fed funds rate,” the statement said.

Fitch previously said in its MENA Sovereigns Outlook that the dollar pegs of these countries are important anchors of economic policy. Since 2009, the policy rate spread has been around zero in Saudi Arabia, 25bp-50bp in Bahrain, and 180bp-230bp for Kuwait.

Fitch added: “We expect non-oil activity to slow across the region, as lower oil prices weaken domestic confidence and compel governments to rein in spending plans.

“We expect policy rates to rise only gradually, and although banks will raise lending rates (boosting their profitability), the increases will not be large enough to meaningfully affect aggregate demand for loans in 2016.”

Fitch said the combination of more expensive credit and more frugal governments will prevent a return to the growth rates of 2010-2014, when non-oil economies expanded at a real rate of 6 percent per year in the GCC on average.

The forward discounts at which Gulf currencies are traded against the US dollar have recently increased but are still low at around 2 percent, implying no devaluation expectations that could put pressure on reserves, Fitch added.

For all Fitch-rated GCC oil exporters other than Bahrain, vast accumulated buffers give them time to make adjustments. At an oil price assumption of $55 per barrel for 2016, Fitch said it expects Saudi Arabia to post fiscal and current account deficits of around 10 percent of GDP and 5 percent of GDP, respectively, but it will still have estimated sovereign net foreign assets (SNFA) of around 100 percent of GDP.

The agency added that Bahrain has a negative SNFA position and an expected general government deficit of 10 percent in 2016, but Fitch expects its current account to remain roughly balanced.