Rate cut in May? UAE residents told to wait for lower loan rates

As speculation swirls globally about potential interest rate cuts, UAE residents are also watching the US Federal Reserve closely. That’s because any move by the Fed typically signals an immediate and identical change in the UAE, which pegs its currency to the US dollar and mirrors Fed decisions to maintain monetary stability.

While there was earlier optimism that a US rate cut could arrive in May, that’s looking increasingly unlikely. Recent signals from Fed officials and updated inflation figures suggest rates will stay put for now—keeping borrowing costs high and deposit interest rates attractive for UAE savers.

US inflation eases, but not enough yet

Inflation in the US has slowed since its 2022 peak, but it remains above the Federal Reserve’s 2% target. March 2025 data showed core inflation cooling to 3.1%—its lowest in nearly four years—but not enough to trigger immediate rate relief. At the same time, the US job market remains strong, giving the Fed no urgent reason to cut.

This has direct consequences in the UAE. Since the UAE Central Bank automatically adjusts rates in line with the Fed, a hold in May means borrowing and saving conditions in the Emirates are unlikely to change soon either.

What does this mean for savers in the UAE?

“For UAE residents, deposit rates have improved over the past year, tracking the Fed’s aggressive rate hikes,” explains Abbud Sharif, a Dubai-based banking analyst. “If the Fed pauses in May, it means savings account rates here will likely stay where they are for a while longer.”

Sharif notes that savvy savers should continue shopping around for competitive returns, especially on fixed deposits or high-yield savings accounts. “It’s a good time to lock in decent interest if you don’t need immediate liquidity,” he advises.

Borrowers still paying more—for now

On the flip side, higher rates continue to affect those with personal loans, car loans, or credit card debt. “Higher borrowing costs have made UAE residents think twice before taking on new debt,” says Abu Dhabi banker Jose Paul. “Whether you're buying a home or refinancing a loan, a May cut would’ve helped. But now, you'll probably have to wait until late 2024.”

Paul adds that residents with variable-rate loans should stay alert. “Once rate cuts do arrive, we’ll likely see better loan terms emerge by early next year.”

Looking ahead: cuts may come, just not yet

Market watchers now expect the first US—and by extension, UAE—rate cut to happen closer to the third quarter of 2024. Futures markets have priced in higher chances of easing from July onward, but not before.

For now, experts say UAE residents should use the current high-rate environment to save more if they can. “It’s a good time to build your emergency fund while interest on deposits is still rewarding,” Sharif says.

In short: May may not bring rate relief, but patient savers and borrowers in the UAE could benefit before year-end.