The Central Bank of the UAE (CBUAE) announced on Wednesday that it has raised its Base Rate applicable to the Overnight Deposit Facility (ODF) by 25 basis points, from 3.65% to 3.9%, effective Thursday, September 17.
The decision followed the US Federal Reserve's announcement on September 16 to raise the Interest Rate on Reserve Balances (IORB) by 25 basis points. Because the UAE dirham is pegged to the US dollar, the CBUAE's monetary policy remains closely aligned with Fed decisions. The Base Rate, anchored to the Fed's IORB, signals the general stance of UAE monetary policy and provides an effective floor for overnight money market rates in the country.
The central bank also said it would maintain the interest rate applicable to short-term liquidity borrowing from the CBUAE at 50 basis points above the Base Rate for all standing credit facilities.
The rate hike directly affects the cost of borrowing in the UAE, including variable-rate mortgages tied to EIBOR (Emirates Interbank Offered Rate). Banking analysts have cautioned that rising financing costs could push up monthly repayments for variable-rate borrowers, although many fixed-rate mortgage holders will not feel the change in the near term. This marks the latest adjustment this year in the UAE's rate policy, which continues to track the US Federal Reserve closely.