The Central Bank of the UAE (CBUAE) has announced a reduction in the Base Rate applicable to the Overnight Deposit Facility by 25 basis points, from 4.15 per cent to 3.90 per cent, effective from Thursday, October 30.
The decision follows the US Federal Reserve’s announcement to reduce the Interest Rate on Reserve Balances by 25 basis points.
The CBUAE has decided to maintain the interest rate applicable to borrowing short-term liquidity from the CBUAE at 50 basis points above the Base Rate for all standing credit facilities, the Emirates News Agency (WAM) said in a statement.
UAE Central Bank reduces overnight deposit facility rate to 3.90%
This means the rate for borrowing short-term liquidity will now stand at 4.40 per cent, reflecting the adjustment to the Base Rate. The Base Rate, which is anchored to the US Federal Reserve’s IORB, signals the general stance of monetary policy in the UAE.
The rate provides a floor for overnight money market interest rates in the country.
The CBUAE’s decision demonstrates the link between UAE monetary policy and US Federal Reserve decisions, with the Base Rate moving in tandem with changes to the Interest Rate on Reserve Balances.
The reduction in the Overnight Deposit Facility rate will affect the returns available to banks and institutions depositing funds with the CBUAE overnight.
The 25 basis point cut brings the UAE’s policy rate in line with the Federal Reserve’s latest adjustment, maintaining the established relationship between the two rates.
