UAE keeps base rate steady after Federal Reserve leaves rates unchanged
UAE keeps base rate at 3.65%, delaying hopes of cheaper loans
Dubai: UAE borrowers waiting for cheaper mortgages, car loans and business finance may have to wait longer after the Central Bank of the UAE kept its Base Rate unchanged at 3.65%.
The decision, announced on June 17, followed the US Federal Reserve’s move to keep the Interest Rate on Reserve Balances unchanged. The CBUAE said it also maintained the rate applicable to borrowing short-term liquidity from the central bank at 50 basis points above the Base Rate for all standing credit facilities.
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The Base Rate applies to the Overnight Deposit Facility and is anchored to the US Federal Reserve’s Interest Rate on Reserve Balances. It signals the general stance of UAE monetary policy and provides an effective floor for overnight money market rates in the country.
The UAE’s interest rate cycle closely tracks the US because the dirham is pegged to the dollar. That keeps domestic monetary policy aligned with Fed decisions, even when local inflation and growth conditions differ from the US economy.
Fed tone keeps markets cautious
Nine Fed policymakers backed higher rates in 2026, with six supporting two quarter-point increases. That marked a major shift from March, when no policymakers had pencilled in a hike and the committee’s central forecast pointed to one rate cut this year.
The change suggests US officials remain worried about inflation staying above target, despite pressure from President Donald Trump for lower rates.
New Fed chair Kevin Warsh also removed language that had previously suggested the central bank’s next move could be a cut, giving policymakers more flexibility if inflation remains sticky.
Warsh said the Fed remains focused on restoring price stability.
"We've missed (on inflation) for five years and we're gonna fix that," he said.
- With inputs from AP.
