The Central Bank of the UAE held its benchmark Base Rate at 5.40% on Wednesday, mirroring the Federal Reserve's decision hours earlier to keep US policy rates unchanged.
In a statement issued from Abu Dhabi, the CBUAE said it had decided to maintain the Base Rate applicable to the Overnight Deposit Facility at 5.40% following the US Federal Reserve's announcement to hold the Interest Rate on Reserve Balances unchanged. The regulator 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.
DIRHAM PEG DRIVES LOCKSTEP POLICY
The Base Rate, which is anchored to the US Federal Reserve's IORB, signals the general stance of UAE monetary policy and provides an effective floor for overnight money market interest rates in the Emirates. The anchor reflects the dirham's peg to the US dollar, which has been in force since 1997 at a fixed rate of 3.6725 dirhams per dollar.
FOURTH CONSECUTIVE HOLD
Wednesday's decision keeps the Base Rate at the level it has occupied since late July 2023, when the CBUAE raised the rate by 25 basis points to 5.40% in step with the Federal Reserve's final hike of the cycle. The rate has since been held at four successive decisions, matching the Federal Reserve's pauses in September, November and December 2023 and now in January 2024.
NEXT MOVE TIED TO MARCH FOMC
The CBUAE's next rate decision will be driven by the Federal Reserve's 19–20 March meeting. Chair Jerome Powell said on Wednesday that a rate cut at the next FOMC meeting was not the base case.