The UAE Central Bank has raised its benchmark borrowing rate following a similar move by the US Federal Reserve.
The Central Bank of the UAE (CBUAE) has increased the Base Rate from 3.15% to 3.90%, effective immediately.
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.
UAE Central Bank anchored to Fed
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.
The move by the UAE was reflected by banks across the GCC as central banks raised benchmark rates to maintain their currency’s pegs to the US dollar.
In Saudi Arabia the Saudi Central Bank, also known as SAMA, lifted its repo and reverse repo rates by 75 bps to 4.5% and 4%, respectively, it said in a statement.
Meanwhile, the Central Bank of Bahrain (CBB) said it raised its key policy interest rate on its one-week deposit facility by 75 basis points to 4.75%, following the U.S. Federal Reserve’s fourth straight hike of that size as the Bahraini dinar is pegged to the dollar.
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