The Central Bank of the UAE has raised its Base Rate on the Overnight Deposit Facility by 25 basis points, taking it from 3.65 percent to 3.9 percent, effective Thursday, September 17.
The move came hours after the US Federal Reserve announced its own 25 basis point increase to the Interest Rate on Reserve Balances. Since the UAE dirham remains pegged to the US dollar, the CBUAE typically mirrors Fed policy shifts to preserve exchange rate stability and keep monetary conditions aligned between the two economies.
The Base Rate acts as a key policy signal, setting an effective floor for overnight money market rates across the UAE. By adjusting it in step with the Fed, the central bank aims to maintain consistency in liquidity conditions for banks and financial institutions operating in the country.
Alongside the rate hike, the CBUAE confirmed it will keep the rate for short-term borrowing under its standing credit facilities unchanged, at 50 basis points above the new Base Rate. This facility allows banks to access short-term liquidity from the central bank when needed, and the steady spread ensures borrowing costs move in tandem with the broader policy rate.
The decision reflects the UAE's longstanding practice of closely tracking US monetary policy, a dynamic rooted in the dollar peg that has anchored the dirham for decades. For businesses and consumers, the adjustment could translate into marginally higher borrowing costs across loans and credit products tied to benchmark rates in the coming weeks.
The central bank did not indicate whether further rate changes are expected, with future moves likely to hinge on the Fed's next policy decisions.
News Source: Emirates News Agency
