The UAE joined central banks across the Gulf in increasing interest rates, following an increase by the US Federal Reserve.
The Central Bank of the UAE (CBUAE) has decided to raise the base rate applicable to the Overnight Deposit Facility (ODF) by 25 basis points, from 4.65% to 4.90%, effective immediately.
This decision was taken following the US Federal Reserve Board’s announcement on Wednesday to increase the Interest on Reserve Balances by 25 basis points.
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 joins Gulf banks in rate hikes
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.
Meanwhile, the central banks across the Gulf also raised their benchmark borrowing rates.
The Saudi Central Bank raised the rate of Repurchase Agreement (Repo) by 25 basis points to 5.5% percent, and the rate of Reverse Repurchase Agreement (Reverse Repo) by 25 basis points to 5%.
In Bahrain, the one-week deposit facility rate increased to 5.75% from 5.5% and the overnight deposit rate was raised to 5.5% from 5.25%, Bahrain’s Central Bank tweeted.
The Central Bank of Qatar likewise raised its interest rates by 25 basis points effective on Thursday, hiking deposit, lending and repo rates by 25 bps to 5.25%, 5.75% and 5.5%, respectively.
Gold prices climbed on Wednesday after the Fed toned down its aggressive approach to reining in inflation.
Spot gold was up 1.7% at $1,973.52 per ounce by 3.56pm EDT, after advancing as much as 2%.
US gold futures settled 0.4% higher at $1,949.60 before the Fed announcement, Reuters reported.
The Fed raised interest rates by a quarter of a percentage point, but indicated it was on the verge of pausing further increases in borrowing costs amid recent turmoil in financial markets.
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