US, UAE set to cut interest rates next week: How it affects your savings, loans

Dubai: UAE residents may soon notice changes in their wallets as both the US Federal Reserve and the UAE Central Bank are expected to lower interest rates next week. While this may sound like distant financial news, it can have a direct impact on your savings, investments, and loans.

In the US, a 25-basis-point cut is widely expected after weaker job numbers, though some analysts are watching the possibility of a 50-basis-point move.

“Without any need for further political pressure from the White House, the Fed will cut key rates in September,” UBP said. Lower rates are intended to make borrowing cheaper and boost spending, but they can also influence returns on savings accounts and deposits in the UAE.

What this means for your savings

If you rely on fixed deposits or bonds for steady returns, you may see slightly lower interest payouts in the coming months. While it won’t drain your accounts, those modest returns on savings could shrink a little, especially if global rates continue to soften.

On the flip side, equity investors could see opportunities. Lower interest rates make borrowing cheaper for companies, potentially boosting stock prices. But caution is advised: JPMorgan traders warn that the market might react unpredictably after the Fed’s announcement. “This current bull market feels unstoppable with new support forming as former tent poles weaken,” said Andrew Tyler, lead trader at JPMorgan.

Borrowing to get cheaper in UAE

For residents with mortgages, personal loans, or plans to invest in property, the rate cuts could be good news. The UAE Central Bank usually follows global trends, meaning domestic lending rates may ease. Lower interest rates make it cheaper to finance homes, cars, or businesses.

Rate cuts can create short-term gains in stocks, but may reduce returns from traditional savings. UAE residents might consider:

• Reviewing fixed deposits and term accounts for the best returns

• Rebalancing investment portfolios to include a mix of stocks, bonds, and savings

• Considering property or personal loans if you’ve been waiting for better borrowing conditions

More uncertainties ahead

US political developments may add some uncertainty. President Trump recently confirmed his top picks to replace Fed Chair Jerome Powell, stirring speculation about future policy.

While the Fed remains independent, these moves can influence global interest rates and, by extension, the UAE economy.

Takeaways for your wallet

• Expect slightly lower returns on savings and fixed deposits

• Borrowing could get cheaper for mortgages, loans, or business finance

• Short-term stock opportunities may arise, but be cautious

• Stay informed and consider rebalancing your portfolio

Lower rates aim to stimulate the economy, but the impact depends on how UAE residents manage savings, investments, and loans. Planning now can help you make the most of this global shift.