Home Industry Economy UAE Central Bank cuts interest rates The move follows a similar announcement by the US Federal Reserve by Varun Godinho March 17, 2020 On Monday, the Central Bank of the UAE (CBUAE) announced that it would cut interest rates, beginning March 16, following a similar announcement by the US Federal Reserve. The CBUAE reduced the interest rate applicable to the 1-week Certificates of Deposit (CDs) by 75 basis points, in line with the Federal Funds Target Rate – Upper Bound. It will maintain the repo rate, applicable to borrowing short-term liquidity from CBUAE against CDs at 50 basis points above the 1-week CD rate. Also, the CBUAE will lower rates applicable to the Interim Margin Lending Facility and the Collateralised Murabaha Facility by 50 basis points, to 50 basis points above the repo rate against CDs. A statement from the CBUAE attributed the reason for the cuts to the financial impact of the Covid-19 coronavirus on global economies. Read: UAE Central Bank announces Dhs100bn package to counter Covid-19 On Saturday, the CBUAE had already announced a Dhs100bn economic stimulus package for the country under a Targeted Economic Support Scheme. Of the Dhs100bn, Dhs50bn would consist of zero-interest, collateralised loans for UAE-based banks and Dhs50bn would be funds freed up from banks’ capital buffers. As part of that programme it downsized the capital mandated for banks to hold for their loans to SMEs by 15-25 per cent. All banks will be allowed to tap into a maximum of 60 per cent of the capital conservation buffer. In addition, those banks designated as systemically important by the central authority can use 100 per cent of their additional capital buffer. Read: Coronavirus: Dubai reveals Dhs1.5bn stimulus package to support businesses Separately, the Dubai government also unveiled a three-month Dhs1.5bn economic stimulus package to support businesses in the emirate. It entailed 15 initiatives focused on the commercial sector, retail, external trade, tourism, and the energy sector. The package includes the cancellation of some fees and a reduction in utility bills for three months for residents and businesses. 0 Comments