US Federal Reserve, UAE Central Bank cut interest rates by 0.25%
Economists widely saw a quarter-point move on Thursday, followed by another in December
The US Federal Reserve cut interest rates by 25 basis points in its second interest rate cut since Covid-19, shrugging off political uncertainty in Washington and moving ahead with easing monetary policy further as inflation continues to cool in the world's largest economy.
Policymakers voted unanimously to lower the US central bank's key lending rate to between 4.50 percent and 4.75 percent, the Fed announced in a statement. Economists worldwide widely expected a quarter-point move on Thursday, followed by another in December.
The rate cut builds on the Fed's action in September, when it kicked off its easing cycle with a large reduction of half a percentage-point, and penciled in additional cuts for this year.
CBUAE cuts rate
Shortly after the Fed's announcement, the UAE Central Bank decided to cut the base rate applicable to the Overnight Deposit Facility (ODF) by 25 basis points from 4.90 per cent to 4.65 per cent, effective from Friday, November 8, 2024.
"This decision was taken following the US Federal Reserve’s announcement today to reduce the Interest Rate on Reserve Balances (IORB) by 25 basis points. 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 UAE Central Bank said in a statement.
(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.)
Easing inflation
"The committee judges that the risks to achieving its employment and inflation goals are roughly in balance," the Federal Open Market Committee said in a statement. "The economic outlook is uncertain, and the committee is attentive to the risks to both sides of its dual mandate."
Policymakers no longer included a line about achieving "greater confidence" that inflation is moving sustainably toward 2 per cent, though they noted inflation has "made progress" toward the central bank's goal. The Fed's favored inflation gauge eased to 2.1 percent in September, while economic growth has remained robust.
The US labor market has also stayed strong overall, despite a sharp hiring slowdown last month attributed in large part to adverse weather conditions and a labor strike. The committee modified its language around the job market slightly as well.
"Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low," the Fed statement said.
- with inputs from Agencies