This decision was taken following the US Federal Reserve’s announcement today to reduce the Interest Rate on Reserve Balances (IORB) by 50 basis points….reports Asian Lite News
The Central Bank of the UAE (CBUAE) has decided to cut the Base Rate applicable to the Overnight Deposit Facility (ODF) by 50 basis points, from 5.40 to 4.90 percent, effective from 19th September.
This decision was taken following the US Federal Reserve’s announcement today to reduce the Interest Rate on Reserve Balances (IORB) by 50 basis points.
The CBUAE has also 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 Base Rate, which is anchored to the US Federal Reserve’s IORB, signals the general stance of monetary policy and provides an effective floor for overnight money market interest rates in the UAE.
It was the US central bank’s first reduction in four years. It comes down from 5.35 per cent to between 4.75 per cent and 5 per cent.
“Recent indicators suggest that economic activity has continued to expand at a solid pace,” the Federal Reserve said in a statement.
Job gains have slowed, and the unemployment rate has moved up but remains low. Inflation has made further progress toward the Committee’s 2 per cent objective but remains somewhat elevated.
“In light of the progress on inflation and the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/2 percentage point to 4-3/4 to 5 per cent.”
In the run-up to the Fed’s two-day meeting, it was expected to announce a hike but there was speculation if it will opt for a more modest 0.25 percentage or 0.5 percentage point. It chose the latter, signaling urgency in dealing with declining job numbers now that inflation had been reined in.
The rate will reduce the costs of house mortgage, auto loans and other credit-based business, and encourage businesses to expand and step up production, hire more people.
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