UAE hikes interest rates

The Central Bank of the UAE (CBUAE) has lifted its benchmark interest rate by half a percentage point, effective May 5.

The decision by the Central Bank follows the biggest rate rise for more than two decades in the United States.

The Federal Reserve announced an increase on Interest on Reserve Balances (IORB) of 50 basis points, to combat fast-rising prices.

With inflation reaching a 40 year high in the US, further increases are expected.

The CBUAE also has decided to maintain the rate applicable to borrowing short-term liquidity from the CBUAE through all standing credit facilities at 50 basis points above the Base Rate.

The Base Rate, which is anchored to the US Federal Reserve’s IORB, signals the general stance of the CBUAE’s monetary policy. It also provides an effective interest rate floor for overnight money market rates.