The Central Bank of the UAE has decided to raise the Base Rate applicable to the Overnight Deposit Facility (ODF) by 25 basis points – from 4.90 per cent to 5.15 per cent, effective immediately.
This decision was taken following the US Federal Reserve Board’s announcement on May 3 to increase the Interest on Reserve Balances (IORB) 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 follows US base rate increase
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 Central Bank of Saudi Arabia, the Central Bank of Bahrain and the Qatar Central Bank also decided to raise interest rates by 25 basis points in line with the decision of the U.S. Federal Reserve.
The US Central Bank’s raised benchmark overnight interest rate to the 5 per cent to 5.25 per cent range, the tenth consecutive increase since March 2022.
The US Central Bank interest rates are now at the highest level in 16 years as it battles to stabilise prices.
A statement by the US Federal Reserve Committee said economic activity expanded at a modest pace in the first quarter and job gains have been robust in recent months, while the USE unemployment rate has remained low.
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