UAE Central Bank Follows Fed Move, Holds Interest Rates Steady
The Central Bank of the UAE (CBUAE) has decided to maintain the Base Rate applicable to the Overnight Deposit Facility (ODF) without change at 5.40%, effective from Thursday, 21 September 2023.
This decision was taken following the US Federal Reserve Board’s announcement on 20 September 2023 to keep the Interest on Reserve Balances (IORB) unchanged.
The CBUAE also has decided to maintain the rate applicable to borrowing short-term liquidity from the CBUAE through all standing credit facilities at 50 basis points above the Base Rate.
The Base Rate, which is anchored to the US Federal Reserve’s IORB, signals the general stance of the CBUAE’s monetary policy. It also provides an effective interest rate floor for overnight money market rates in the UAE.
U.S. central bankers expect that after a final interest-rate hike this year, to 5.6%, they will end next year with short-term borrowing costs at 5.1%, reflecting fewer interest rates cuts than they anticipated three months ago.
That’s according to the median of 19 forecasts included in the latest quarterly summary of Federal Reserve policymaker projections published on Wednesday, alongside the Fed’s decision to leave its policy rate unchanged in a range of 5.25%-5.50%.
