Abu Dhabi – The Central Bank of the UAE (CBUAE) has announced it is keeping its Base Rate for overnight deposit facilities at 3.65%. This move follows the US Federal Reserve’s decision to maintain interest rates unchanged. Obviously, this decision highlights the UAE’s commitment to a balanced monetary policy aimed at protecting the local currency’s purchasing power, given the Dirham’s peg to the US Dollar. It also ensures there are no gaps in financing costs within the local market compared to global benchmarks.
“The Base Rate”: How the Central Bank Controls Liquidity Pulse?
Alongside the main rate fix, the Central Bank decided to maintain the short-term borrowing rate for banks at 50 basis points above the Base Rate. Clearly, this tool provides the CBUAE with the ability to regulate the volume of liquidity available to banks and manage overnight cash flow. As a result, the Base Rate remains the “compass” directing interbank interest rates in the UAE, ensuring the banking system’s efficiency and its readiness to face any economic fluctuations driven by energy prices or geopolitical tensions.
Financial Stability Amid the Storm: Why Does the Dirham Follow the Dollar?
Analysts believe this rate hold provides UAE financial markets with a state of “predictable stability,” reducing volatility in borrowing costs for individuals and businesses. Accordingly, the close alignment with the US Fed is not merely a technical procedure but a defensive strategy to maintain the country’s investment attractiveness and prevent capital flight. In current conditions, the CBUAE sends a reassuring message to the private sector that financing costs will remain steady, supporting economic growth plans despite the challenges facing the global economy in 2026.
