UAE interest rates unlikely to fall as Fed expected to hold steady
Market analysts predict the US Federal Reserve will keep rates unchanged, signalling no immediate relief for UAE borrowers.
At a glance
- US Federal Reserve expected to hold rates unchanged at meeting concluding 28 October
- UAE Central Bank base rate anchored to Fed's interest rate, currently at 3.9%
- Markets pricing in approximately 80% chance of another Fed rate increase in December
- Analysts expect hawkish Fed tone reflecting ongoing inflation concerns
Three market analysts expect the US Federal Reserve to leave interest rates unchanged at the conclusion of its two-day meeting on Wednesday, with some forecasting a possible increase in December. Since the UAE dirham is pegged to the dollar and the UAE Central Bank's base rate is anchored to the Fed's interest rate on reserve balances, a US hold would likely point towards an unchanged UAE base rate, currently at 3.9% following a quarter-percentage-point increase in September.
Analysts suggest the Fed may adopt a hawkish tone, with markets pricing in close to an 80% probability of another rate increase before year-end. This outlook offers little prospect of immediate relief for UAE residents through a policy rate cut, with focus instead on whether policymakers signal further borrowing cost increases.
Why it matters
UAE interest rates are directly linked to US Federal Reserve policy through the dirham's dollar peg, making Fed decisions critical for local borrowers and savers.
Original reporting
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