UAE Central bank in Abu Dhabi. Image Credit: Ahmed Kutty/Gulf News Archives

Dubai: An hour after the US Federal Reserve hiked their fed funds rate for a second time in three months, the central bank of the UAE said in an late night announcement that they will raise interest rates applied to certificate of deposits by 25 basis points effective Thursday.

The repo rate applicable to borrowing short-term liquidity from the UAE central bank against certificates of deposits has also been increased by 25 basis points to 1.25 per cent, it said in a statement posted on its website.

The fixed peg of the dirham to the US dollar means that local interest rates have to be aligned to those of the dollar. Certificates of deposits are used as a tool for liquidity management by the central bank.