This week, the US Federal Reserve raised its rate by 3 quarters of a percentage pt, which is its biggest increase since 1994.

Many expected a .50% jump but few expected this aggressive jump of base interest rates, a move to avoid recession in the US.

Like many central banks here in the GCC, the UAE base rate is anchored to the fed and so overnight, The Central Bank of the UAE (CBUAE) decided to raise the Base Rate applicable to the Overnight Deposit Facility by 75 basis points, effective from today.

The UAE Central Bank raised its base rate at .75% but will maintain the rate applicable to borrowing short-term liquidity from the CBUAE through all standing credit facilities at 50 basis points above the Base Rate

CBUAE raises the Base Rate at 75 basis points.#WamNews https://t.co/uSQdniL2qX pic.twitter.com/goSxWw5d8x

— WAM English (@WAMNEWS_ENG) June 15, 2022

What this means for you

The reason for the US to make this move is to slow down inflation and avoid a recession. This move will affect the interest rates at which you borrow, on variable loans and variable mortgage rates and variable credit rates.

However, it’s worth noting The UAE Central Bank (CBUAE) also has decided to maintain the rate applicable to borrowing short-term liquidity from the CBUAE through all standing credit facilities at 50 basis points above the Base Rate. The Base Rate, which is anchored to the US Federal Reserve’s IORB, signals the general stance of the CBUAE’s monetary policy. It also provides an effective interest rate floor for overnight money market rates.