UAE Central Bank Maintains Base Rate at 4.4% Amid US Federal Reserve Policies
The decision reflects the UAE's alignment with US monetary policy as the region navigates economic uncertainties.
The Central Bank of the United Arab Emirates (CBUAE) announced on Wednesday that it will maintain the base rate for its overnight deposit facility at 4.40%.
This decision comes on the heels of a similar announcement from the US Federal Reserve, which has opted to keep its interest rates steady as well.
The UAE dirham is pegged to the US dollar, leading the CBUAE to closely align its monetary policy with changes made by the US central bank.
The CBUAE also decided to maintain the interest rate applicable to borrowing short-term liquidity from the central bank at 50 basis points above the base rate for all standing credit facilities.
The Federal Reserve's decision to hold interest rates steady reflects its cautious approach as it assesses the implications of economic pressures, particularly those arising from ongoing trade tensions linked to tariff policies.
The Federal Open Markets Committee (FOMC) confirmed that the target range for the federal funds rate will remain at 4.25 to 4.5 percent, marking the third consecutive month without a change.
In a related statement, the FOMC indicated its intent to continue reducing its holdings of Treasury securities and agency mortgage-backed securities, with plans to alter the rate of these reductions beginning in April.
Specifically, the monthly redemption cap on Treasury securities is set to be reduced from $25 billion to $5 billion.
Over the past year, the FOMC has made three consecutive rate cuts, responding to trends indicating a slowdown in the US labor market.
Current market expectations suggest a 16.7 percent probability of a rate cut during the May meeting and a 53.2 percent probability for the June meeting.
Economic analysts are predicting the potential for two rate cuts within the year, which could bring the terminal rate closer to 3.75 percent.
Recent consumer price index (CPI) figures indicate inflation at 2.8 percent, significantly above the Federal Reserve's target of 2 percent.
Such inflationary pressures may compel the Fed to maintain higher interest rates despite challenges posed by potential economic downturns, which are now assessed at a 20 percent probability due to concerns associated with tariff policies.
Market sentiment regarding the UAE's decision to maintain interest rates suggests that financial institutions may experience stable performance, with analysts noting that the banking and financial sectors constitute around 40 percent of the UAE stock market.
These sectors are perceived as somewhat impervious to broader economic volatility driven by tariffs, according to industry experts.
This decision comes on the heels of a similar announcement from the US Federal Reserve, which has opted to keep its interest rates steady as well.
The UAE dirham is pegged to the US dollar, leading the CBUAE to closely align its monetary policy with changes made by the US central bank.
The CBUAE also decided to maintain the interest rate applicable to borrowing short-term liquidity from the central bank at 50 basis points above the base rate for all standing credit facilities.
The Federal Reserve's decision to hold interest rates steady reflects its cautious approach as it assesses the implications of economic pressures, particularly those arising from ongoing trade tensions linked to tariff policies.
The Federal Open Markets Committee (FOMC) confirmed that the target range for the federal funds rate will remain at 4.25 to 4.5 percent, marking the third consecutive month without a change.
In a related statement, the FOMC indicated its intent to continue reducing its holdings of Treasury securities and agency mortgage-backed securities, with plans to alter the rate of these reductions beginning in April.
Specifically, the monthly redemption cap on Treasury securities is set to be reduced from $25 billion to $5 billion.
Over the past year, the FOMC has made three consecutive rate cuts, responding to trends indicating a slowdown in the US labor market.
Current market expectations suggest a 16.7 percent probability of a rate cut during the May meeting and a 53.2 percent probability for the June meeting.
Economic analysts are predicting the potential for two rate cuts within the year, which could bring the terminal rate closer to 3.75 percent.
Recent consumer price index (CPI) figures indicate inflation at 2.8 percent, significantly above the Federal Reserve's target of 2 percent.
Such inflationary pressures may compel the Fed to maintain higher interest rates despite challenges posed by potential economic downturns, which are now assessed at a 20 percent probability due to concerns associated with tariff policies.
Market sentiment regarding the UAE's decision to maintain interest rates suggests that financial institutions may experience stable performance, with analysts noting that the banking and financial sectors constitute around 40 percent of the UAE stock market.
These sectors are perceived as somewhat impervious to broader economic volatility driven by tariffs, according to industry experts.
Translation:
Translated by AI
