UAE: CBUAE keeps Base Rate unchanged at 5.40%

CBUAE Maintains Base Rate at 5.40% Amid Global Monetary Policy Stability

Abu Dhabi, United Arab Emirates – March 21, 2024: The Central Bank of the UAE (CBUAE) has announced its decision to maintain the Base Rate for the Overnight Deposit Facility (ODF) unchanged at 5.40 per cent, reaffirming its commitment to stability in the nation’s monetary policy landscape.

This significant determination follows closely on the heels of the US Federal Reserve’s recent pronouncement on March 20, in which it opted to keep the Interest on Reserve Balances (IORB) steady. This parallel decision highlights a coordinated approach among global monetary authorities, underpinning the interconnectedness of financial markets.

Moreover, the CBUAE has opted to retain the prevailing interest rate applicable to accessing short-term liquidity from the central bank, standing at 50 basis points above the Base Rate for all standing credit facilities. This strategic move underscores the CBUAE’s proactive stance towards ensuring adequate liquidity in the financial system, essential for sustaining economic activity and mitigating financial risks.

The Base Rate, intricately linked to the US Federal Reserve’s IORB, serves as a pivotal gauge of the prevailing monetary policy trajectory in the UAE. Beyond its symbolic significance, the Base Rate acts as a fundamental benchmark, exerting a profound influence on overnight money market interest rates. By setting a robust floor for borrowing costs, it plays a pivotal role in shaping lending dynamics and capital allocation across diverse sectors of the economy.

By upholding stability in key interest rates, the CBUAE aims to instill confidence within financial markets, fostering an environment conducive to investment and economic growth. This strategic approach underscores the central bank’s unwavering commitment to steering the UAE’s economy towards sustainable prosperity.