UAE Central Bank keeps base rate at 4.40% following US Fed move
The US Federal Reserve kept its benchmark interest rate unchanged on Wednesday, maintaining the federal funds rate at 4.25 to 4.5 per cent
The Central Bank of the UAE (CBUAE) has decided to maintain the base rate for the overnight deposit facility (ODF) at 4.40 per cent, following the US Federal Reserve’s decision to keep the Interest Rate on Reserve Balances (IORB) unchanged.
In addition, the CBUAE will maintain the interest rate for borrowing short-term liquidity from the bank at 50 basis points above the Base Rate for all standing credit facilities.
The base rate, which is linked to the US Federal Reserve’s IORB, serves as a signal for the general stance of monetary policy and establishes an effective floor for overnight money market interest rates in the UAE.
US Fed provides insights into policymakers’ expectations for inflation, interest rates
The Federal Reserve kept its benchmark interest rate unchanged on Wednesday, maintaining the federal funds rate at 4.25 to 4.5 per cent, as policymakers assessed economic conditions amid heightened uncertainty.
In its statement, the Fed acknowledged that while economic activity continues to expand at a solid pace, uncertainty around the economic outlook has increased.
The focus was on the Fed’s quarterly economic projections, which provided fresh insights into policymakers’ expectations for growth, inflation, unemployment, and interest rates through the end of 2025 and beyond.
The latest median forecasts revised GDP growth for 2025 downward to 1.7 from 2.1 per cent in December, while the unemployment rate is now expected to reach 4.4 per cent, up from 4.3 per cent.
Core inflation projections were also revised higher, with the Fed now expecting 2.8 per cent inflation by the end of next year, compared to the previous 2.5 per cent forecast.
Despite shifting economic indicators, the central bank maintained its longer-run federal funds rate projection at 3 per cent and left its end-of-2025 midpoint rate forecast at 3.9 per cent, signaling that policymakers still anticipate two rate cuts this year.
While US President Donald Trump has continued to push for rate cuts, his ongoing trade policies and tariffs add further complexity to the Fed’s economic balancing act.
The next Federal Open Market Committee (FOMC) meeting is scheduled for May, when policymakers will reassess the economic landscape and potential rate adjustments.
