The Central Bank of the UAE (CBUAE) has announced a reduction in the Base Rate applicable to the Overnight Deposit Facility (ODF), marking the recent UAE Central Bank rate cut. Effective 18 September, the rate has been lowered by 25 basis points, moving from 4.40% to 4.15%. The adjustment follows the US Federal Reserve’s decision to cut the Interest Rate on Reserve Balances (IORB) by the same margin. By mirroring this move, the UAE aims to maintain monetary stability and ensure consistency with global financial markets.
Borrowing Costs and Market Impact
In its latest decision, the CBUAE confirmed that the interest rate for borrowing short-term liquidity through standing credit facilities will remain unchanged at 50 basis points above the Base Rate. This measure continues to give financial institutions access to stable funding while signalling the central bank’s balanced approach. The UAE Central Bank rate cut reflects the general stance of monetary policy and sets the effective floor for overnight money market rates in the UAE. Consequently, the move is expected to influence borrowing costs across the economy, particularly in sectors tied to interbank lending, because the Base Rate is anchored to the US Federal Reserve’s IORB.
Reinforcing Policy Stability
The central bank’s step underscores its commitment to aligning with global monetary trends while safeguarding domestic financial stability. By adjusting the Base Rate in conjunction with the Federal Reserve, the UAE ensures predictability for markets and institutions. This alignment underscores the significance of the UAE Central Bank rate cut as it supports the country’s economic framework, where transparent interest rate management remains a cornerstone of monetary policy.
