CBUAE keeps rates constant, follows US Fed cue

Image credit: WAM

The Central Bank of the UAE (CBUAE) announced that it will maintain the Base Rate applicable to the Overnight Deposit Facility (ODF) at 5.40 per cent.

It said the policy decision follows in lock-step with the US Federal Reserve’s announcement to keep the Interest Rate on Reserve Balances (IORB) unchanged.

The CBUAE has also decided to maintain the interest rate applicable to borrowing short-term liquidity from the CBUAE at 50 basis points above the Base Rate for all standing credit facilities.

The Base Rate, which is anchored to the US Federal Reserve’s IORB, signals the general stance of monetary policy and provides an effective floor for overnight money market interest rates in the UAE.

The #CentralBankUAE has decided to maintain the BaseRate applicable to the Overnight Deposit Facility (ODF) without change at 5.40 per cent. pic.twitter.com/dGz2OOGK9G

— Central Bank of the UAE (@centralbankuae) July 31, 2024

However, rates cuts could be on the horizon as US Fed chair Jerome Powell on Wednesday said, “there was a growing sense of confidence” the central bank could cut rates in September.

The decision would be based on the cooling of inflationary pressure which has been on a downward trend for the past two months.

“In recent months, there has been some further progress toward the Committee’s 2 percent inflation objective,” the Fed said. This marks a slight change in tone from its decision in June, when it noted only that “modest further progress” had been made.

Read: US Fed says rate cuts could come ‘soon’