UAE leaves interest rates unchanged as Fed pauses rate cuts

The Central Bank of the UAE (CBUAE) has kept its base interest rate unchanged at 4.40%, following the U.S. Federal Reserve’s decision to hold rates steady as policymakers assess inflation and job market data, WAM reported.

The CBUAE’s decision aligns with the Fed's move to maintain the Interest Rate on Reserve Balances (IORB), reflecting the UAE’s monetary policy approach, which is anchored to U.S. interest rates. The central bank also kept the rate on short-term borrowing from its standing credit facilities at 50 basis points above the base rate.

The Fed’s decision, announced Wednesday, left the benchmark U.S. rate in the 4.25%-4.50% range. Fed Chair Jerome Powell emphasized that while inflation remains elevated, there is no rush to cut rates further. Powell said policymakers are awaiting economic data to determine whether additional adjustments are necessary.

“We do not need to be in a hurry to adjust our policy stance,” Powell told reporters. He noted that reducing rates too aggressively could hinder progress on inflation, adding that monetary policy is “well-positioned” for the challenges ahead.

Monetary policy outlook

The UAE’s base rate, tied to the Fed’s IORB, signals the broader stance of monetary policy and serves as a floor for overnight money market rates in the country. The decision to maintain rates comes as global markets continue to watch for signs of easing inflation and economic stability.

While the Fed cut rates three times last year, recent inflation readings suggest progress toward the central bank’s 2% target has stalled. Powell reiterated that any future rate cuts will depend on further signs of declining inflation and labor market stability.

Market analysts say the Fed’s approach remains "mildly hawkish," with investors expecting the next rate cut no earlier than June. The UAE’s decision to keep rates steady reflects its close monetary ties to the U.S., ensuring financial stability amid global economic uncertainty.