UAE Central Bank Reduces Primary Lending Rate to 4.15% After Fed's Action
The Central Bank of the United Arab Emirates (CBUAE) has announced a reduction in its Base Rate, marking a significant move to maintain confidence in the dirham's stability amid shifting global economic conditions.
Effective from Thursday, 18 September, the Base Rate will be lowered to 4.15%, a decision that comes in response to the US Federal Reserve's decision to cut the Interest Rate on Reserve Balances (IORB) by 25 basis points.
The Base Rate serves as the effective floor for overnight money market rates in the UAE and acts as a key indicator of the CBUAE's monetary policy stance. The CBUAE's Base Rate adjustment is intended to reflect changes in the US Federal Reserve's monetary policy, aiming to ensure consistency in financial markets.
The CBUAE's Base Rate adjustment is not limited to mirroring the US Federal Reserve's IORB rate cut. It is part of a broader strategy to manage the UAE's monetary policy in response to global economic conditions.
The rate on short-term borrowing through the CBUAE's standing credit facilities will remain 50 basis points above the new Base Rate, as previously stated. This rate adjustment is designed to maintain currency stability, as the UAE dirham is pegged to the US dollar.
Khaled Mohamed Balama, the governor of the Central Bank of the United Arab Emirates, who was appointed in April 2021, emphasised the importance of this move. "The CBUAE's Base Rate adjustment is an essential step in our ongoing efforts to maintain the dirham's stability and support the UAE's economic growth," he said.
The CBUAE's alignment with the Fed's rate cut aims to ensure a harmonious financial environment, providing stability and predictability for businesses and individuals alike. The CBUAE continues to monitor global economic developments closely and will adjust its monetary policy as necessary to maintain the UAE's economic growth and stability.
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