The end of cheap money

Happy Friday, wonderful people. Cheap money ended in three time zones this week as rates went up in Washington on Wednesday, in five Gulf capitals hours later, and in Tokyo this morning.

The Bank of Japan took the last of the cheap funding off the table this morning as Kazuo Ueda’s board raised to 1.25%, a 31-year high, a day after Prime Minister Sanae Takaichi reshuffled her cabinet promising to prioritise growth. Japan has been the world’s cheapest source of money for a generation.

Tokyo’s move followed Washington — and the Gulf — after the US Federal Reserve raised rates in the first decision since Kevin Warsh took the helm of the US Federal Reserve, and the first time rates were raised in the US since 2023. The Fed lifted its benchmark rates by a quarter point as price pressure is ramping up on new tariffs, the war’s energy shock, and AI-related capex.

The White House had a spokesman on Fox within minutes calling it “a rather unfortunate decision” with no “particularly compelling economic case.” Warsh told his press conference that inflation has been “too high … for too long.”

Five Gulf central banks moved within hours: The UAE took its base rate to 3.9% and Saudi’s repo went to 4.5%, with Bahrain, Qatar and Oman following; Kuwait, which tracks a basket rather than the USD alone, held at 3.5%.

Meanwhile: The 2027 F1 calendar puts the Gulf at both ends of the season. Bahrain takes pre-season testing in February and opens the championship from 12-14 March, Jeddah follows a week later, and the year closes in Qatar and then Abu Dhabi in December. Sprints go from six to ten, with Bahrain and Abu Dhabi running them for the first time. Four of 24 races on this side of the world, including the two that close it out. –Salma