UAE interest rates remain unchanged amid Fed rate decision

Amid the US Federal Reserve keeping its interest rates unchanged, the Central Bank of the UAE (CBUAE) has followed by keeping its base rate applicable to the Overnight Deposit Facility (ODF) at 5.40 per cent.

The CBUAE traditionally moves lockstep with the US Fed amid the UAE having pegged its currency to the US dollar at a rate of Dhs3.67 to $1.

Announcing a decision to keep rates in the US unchanged, Fed Chair Jerome Powell said that “inflation is still too high.”  

“Further progress in bringing it down is not assured and the path forward is uncertain,” he said.

However, he did signal that the US Fed is still leaning towards cutting rates this year, rather than increasing them. This is despite inflation in the US having remained stubbornly above the Federal Reserve’s 2 per cent target range.

The Fed’s preferred inflation measure, the personal consumption expenditures price index, increased at a 2.7 per cent annual rate in March. This marked an acceleration from the previous month.

Powell, though, was still cautious about future rate cuts.

“If we did have a path where inflation proves more persistent than expected, and where the labour market remains strong but inflation is moving sideways and we’re not gaining greater confidence, well, that would be a case in which it could be appropriate to hold off on rate cuts,” Powell said.

“There are paths to not cutting and there are paths to cutting. It’s really going to depend on the data.”