US, UAE Central Banks on track for final interest rate cut of 2025 next week

Dubai: The US Federal Reserve is all set to deliver another rate cut next week, with markets placing roughly a 90% probability on a 25-basis-point move at the December 10 meeting. The UAE is positioned to follow.

Because the UAE dirham is pegged to the US dollar, the Central Bank of the UAE typically mirrors Fed moves. A matching cut would bring immediate changes to daily finances in the UAE—lower borrowing costs for mortgages, personal loans and variable-rate credit cards, and easier access to new credit.

The improved clarity on the Fed move comes after surprisingly softer US job market indicators and a sharp cooling in business activity, strengthening expectations that rates will fall to 3.5%–3.75%. Major banks now project a similar path, reinforcing the sense that another cut is likely.

BofA Global Research now expects a quarter-point cut this month after previously predicting no change, pointing to weaker labour conditions and recent comments from policymakers that hint at earlier easing.

“Our forecast of additional cuts next year is due to the change in leadership, not our read on the economy,” analysts at BofA said. The bank now expects two more cuts in June and July 2026, which would lower rates to 3%–3.25%.

Leadership changes could also influence the direction of policy. Reports last week suggested White House economic adviser Kevin Hassett is the frontrunner to become the next Fed chair, raising questions about how a shift at the top could shape decisions in the coming year.

Recent US data has added pressure for the Fed to act. Private employers cut 32,000 jobs in November, according to ADP, reversing the small gains economists expected. Business surveys also showed weaker confidence in both manufacturing and services. These data points pushed the dollar lower as investors positioned for easier conditions.

Daniela Sabin Hathorn, senior market analyst at Capital.com, said the dollar reflects rising conviction about the December decision. “The US dollar is facing renewed downside pressure as markets become more confident that the Federal Reserve is going to cut rates at its meeting next week,” she said.

Layoff announcements highlight the strain. Challenger, Gray & Christmas reported 71,321 planned job cuts in November. While that was half of October’s total, it was still the highest number recorded for any November in three years and 24% higher than a year earlier. “Layoff plans fell last month, certainly a positive sign,” said Andy Challenger, the firm’s chief revenue officer.

UAE residents looking for clues on future borrowing costs won’t get a full US labour update before the Fed meeting. The November payrolls report—delayed to December 16 due to the shutdown—will include both October and November figures, leaving policymakers to decide without complete data.

Most major global brokerages still expect a 25-basis-point cut next week. A few, including Morgan Stanley and Standard Chartered, think the Fed may hold steady. CME’s FedWatch tool shows markets heavily tilted toward a cut.

For UAE households, the decision carries practical effects. Lower rates usually mean reduced returns on savings accounts and fixed deposits, encouraging people to reconsider where they place their money. Spending or investing becomes more attractive when traditional savings earn less. Property and equity markets often become more active as financing costs fall and developers gain cheaper access to credit.

With expectations building on both sides of the Atlantic, next week’s decisions are set to shape borrowing, saving and investment conditions across the US and the UAE. A coordinated cut would mean cheaper loans, weaker savings returns and a shift in investment opportunities for residents as the year comes to an end.