UAE Central Bank Cuts Key Interest Rate for First Time in 2025 Following US Fed Move

Dubai, UAE – In a significant monetary policy shift, the Central Bank of the UAE (CBUAE) has announced its first interest rate cut of 2025, mirroring a similar move by the US Federal Reserve. The base rate applicable to the Overnight Deposit Facility (ODF) has been reduced by 25 basis points, from 4.40% to 4.15%, the bank confirmed late Wednesday.

The rate cut comes in response to the US Fed’s decision to lower its Interest Rate on Reserve Balances (IORB) by an identical margin, reflecting the UAE’s monetary policy alignment with the US dollar, to which the UAE dirham is pegged. As per its official statement, the CBUAE emphasized that the base rate remains anchored to the Fed's IORB, serving as a critical indicator of the central bank’s monetary policy stance and providing an effective floor for overnight money market rates in the UAE.

In addition to the base rate adjustment, the CBUAE stated it would maintain the interest rate for borrowing short-term liquidity through all standing credit facilities at 50 basis points above the Base Rate, consistent with prior practice.

This move is expected to bring modest relief to borrowers in the UAE after a prolonged period of tightening monetary policy through 2023 and 2024. However, experts caution that further decisions will depend heavily on inflation data and economic trends in the US and global markets in the months ahead.

The UAE’s proactive policy stance underscores the importance of maintaining monetary stability while supporting economic growth in a shifting global environment.

for updates click below:

https://yourwebsite.com/economy/uae-central-bank-interest-rate-cut-2025-fed-alignment