UAE central bank reduces repo to match fed cut

Abu Dhabi: UAE Central Bank announced on Wednesday that it had cut the repurchase rate on its Certificates of Deposits by 75 basis points to 2.25 per cent, matching the US Federal Fund Rate.

"We have strictly matched the US Federal Reserve and reduced the repo rate by 75 basis points," Mohamed Abdullah, assistant executive director of the central bank's treasury department told Gulf News.

The bank denied Tuesday's reports of US influence on the country's monetary policy.

"We have not even heard of this, and the only considerations we take into account are the economic farewell of the UAE, and our obligations towards the Gulf Cooperation Council," a bank's official said.

With the inflation rate already soaring, estimated at 7 to 9 per cent in 2008, the increasing negative real interest rate will only result in more pressure on prices.

Meanwhile, most economists agree that the country needs to revalue its currency to reflect its real worth, rather than increasing the money supply. Other GCC countries, such as Saudi Arabia, are resorting to setting a higher rate for the reserves held by commercial banks.