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Fed holds rates at 23-year high, UAE follows suit

US and UAE Central Banks maintain current interest rates amid inflation control efforts

Fed holds rates at 23-year high, UAE follows suit

FOMC unanimously decided to keep the benchmark interest rate between 5.25% and 5.5%

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Fed keeps rates steady at 5.25%-5.5%, marking an eighth consecutive pause.

UAE Central Bank maintains Base Rate at 5.40% following Fed's decision.

US inflation shows signs of stabilization, aligning closer to the 2% target.

The US Federal Reserve maintained its key monetary policy rate at a 23-year high, marking the eighth consecutive time it has paused rate changes.

The Federal Open Market Committee (FOMC) unanimously decided to keep the benchmark interest rate between 5.25% and 5.5% after two days of deliberations.

The Fed noted it is "attentive to the risks to both sides of its dual mandate," signaling ongoing vigilance in balancing economic growth and inflation control.

Federal Reserve Chair Jerome Powell and the central bank's policymakers were anticipated to hold rates steady. Market participants were eager for indications of potential rate cuts in September, speculating a quarter-point reduction and a slim possibility of a half-point cut.

Following the Fed's announcement, the UAE Central Bank also decided to keep its interest rate unchanged.

The Central Bank of the UAE (CBUAE) announced it would maintain the Base Rate for the Overnight Deposit Facility (ODF) at 5.40%. This decision was influenced by the Fed's move to leave the Interest Rate on Reserve Balances (IORB) unchanged.

Additionally, the CBUAE stated that the interest rate for borrowing short-term liquidity would remain at 50 basis points above the Base Rate for all standing credit facilities.

The Base Rate, tied to the US Federal Reserve's IORB, serves as a guide for monetary policy and sets a floor for overnight money market rates in the UAE.

As for the US economy, recent data indicate that inflation is aligning with the Fed's long-term target of 2%. After a brief increase in inflation earlier this year, the Fed's preferred measure of inflation eased to an annual rate of 2.5% last month.

Meanwhile, the economy continues to show resilience, and the labor market is stabilizing.

The Fed acknowledged "some further progress" towards its 2% inflation goal, reflecting a slightly more optimistic outlook compared to its June statement, which described the progress as "modest."

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