Following the US Federal Reserve Board’s increasing of the interest rate on reserve balances (IORB) by 25 basis points, the UAE Central Bank (CBUAE) has decided to raise the Base Rate applicable to the overnight deposit facility (ODF) by 25 basis points, effective March 17.
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.
ODF facilities for banks were first introduced in the UAE on July 2020 in what was then considered the first step towards implementing the new Dirham Monetary Framework and as a replacement of the issuance of one-week Certificate of Deposits.