The UAE Central Bank reduced its benchmark interest rate by 25 basis points, after the US Federal Reserve’s move on Wednesday to cut rates to stimulate economic activity as inflationary pressures subside.
The banking regulator reduced its base rate for the overnight deposit facility to 4.40 per cent, effective from Thursday. It maintained the interest rate applicable to borrowing short-term liquidity from the regulator at 50 basis points above the base rate for all standing credit facilities, the regulator said on Wednesday.
This move aligns with the Fed’s decision on Wednesday to lower the interest rate on reserve balances by 25 basis points.
The UAE Central Bank base rate, which is anchored to the Fed's interest on reserve balances, signals the general stance of the Central Bank's monetary policy and provides an effective interest rate floor for overnight money market rates in the UAE.
The UAE Central Bank typically aligns its interest rate decisions with those of the Fed because of the dirham's peg to the US dollar.
The Fed began its easing cycle with a 50 basis points cut in September on slowing inflation after keeping rates at a 22-year high for more than a year. Last month, it lowered the interest rate on reserve balances by 25 basis points.
The US entered a monetary easing cycle as the Fed aimed to prevent a recession and guide the world’s largest economy to a soft landing.
This decision reflects the Fed's confidence that "elevated levels of inflation are not overly concerning", Srijan Katyal, global head of strategy and client services at Abu Dhabi-based international securities brokerage ADSS.
“The Fed appears to have dispatched of inflationary worries surrounding Trump’s election win, which fueled higher US yields, a stronger dollar and surging stocks."
Rate cut will likely further boost risk assets helping stocks build on year-to-date rallies with potential for small cap stocks to continue to make up ground on tech heavy names, as Trump policies would support local businesses through tax cuts and protectionist policy, Mr Katyal added.
Economic impact
The UAE continues to prioritise diversifying its economy away from oil, with growth in the non-oil sector accelerating in recent quarters.
The country’s economy is now projected to expand by 4 per cent this year, a slight upward revision from the 3.9 per cent forecast in June, according to the latest report by the UAE Central Bank.
The regulator also lowered its inflation forecast for 2024 to 2.2 per cent, down from an earlier estimate of 2.3 per cent. The Central Bank, in September, noted that inflation forecasts could be revised downward if disinflationary trends in food, beverages, and key non-tradable components persist.
The UAE's economy grew by 3.4 per cent in the first quarter, with real GDP reaching Dh430 billion ($117.08 billion), according to preliminary estimates from the Federal Competitiveness and Statistics Centre, cited by the Ministry of Economy in September. The non-oil sector recorded a 4 per cent year-on-year expansion during the period, reflecting continued momentum in the country’s diversification efforts.
Gulf economies follow Fed rates
Most Gulf central banks align their policy rate changes with the Fed, as their currencies are pegged to the US dollar. Kuwait is the exception among the six-member economic GCC bloc, as its dinar is linked to a basket of currencies.
Despite experiencing much lower inflation than other regions, these oil-rich economies kept pace with the Fed’s aggressive rate increase cycle.
The Saudi Central Bank, better known as Sama, on Wednesday matched the Fed rate cut, reducing its repurchase agreement (repo) rate by 25 basis points to 5 per cent and its reverse repo rate by the same basis points to 4.5 per cent.
The Qatar Central Bank reduced the repo rate by 30 basis points to 4.85 per cent. It also reduced its deposit rate to 4.60 per cent, and the lending rate to 5.10 per cent.
The Central Bank of Bahrain cut its key rate on overnight deposits by 25 basis points to 5 per cent, effective Thursday. The CBB said that the move is part of its measures to maintain monetary and financial stability in light of global financial market developments.
The Central Bank of Kuwait said it adopted a “gradual and balanced approach in adjusting the discount rate, ensuring alignment with the local economic conditions, maintaining macroeconomic stability, and enhancing sustainable growth”. It reduced its discount rate by 25 basis points to 4 per cent as of Thursday.
In the Gulf region, home to one third of the world’s proven oil reserves, government spending is primarily driven by oil prices rather than monetary policy.
Economies such as Saudi Arabia, the world’s largest oil exporter, and the UAE, the Arab world’s second-largest economy, are investing tens of billions of dollars in projects aimed at economic diversification. These initiatives are often funded through a mix of government equity, commercial loans and project bonds.
Company name: Play:Date
Launched: March 2017 on UAE Mother’s Day
Founder: Shamim Kassibawi
Based: Dubai with operations in the UAE and US
Sector: Tech
Size: 20 employees
Stage of funding: Seed
Investors: Three founders (two silent co-founders) and one venture capital fund
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Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
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The specs
AT4 Ultimate, as tested
Engine: 6.2-litre V8
Power: 420hp
Torque: 623Nm
Transmission: 10-speed automatic
Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)
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Lexus LX700h specs
Engine: 3.4-litre twin-turbo V6 plus supplementary electric motor
Power: 464hp at 5,200rpm
Torque: 790Nm from 2,000-3,600rpm
Transmission: 10-speed auto
Fuel consumption: 11.7L/100km
On sale: Now
Price: From Dh590,000
Tips to keep your car cool
- Place a sun reflector in your windshield when not driving
- Park in shaded or covered areas
- Add tint to windows
- Wrap your car to change the exterior colour
- Pick light interiors - choose colours such as beige and cream for seats and dashboard furniture
- Avoid leather interiors as these absorb more heat
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UAE v Ireland
1st ODI, UAE win by 6 wickets
2nd ODI, January 12
3rd ODI, January 14
4th ODI, January 16
Electric scooters: some rules to remember
- Riders must be 14-years-old or over
- Wear a protective helmet
- Park the electric scooter in designated parking lots (if any)
- Do not leave electric scooter in locations that obstruct traffic or pedestrians
- Solo riders only, no passengers allowed
- Do not drive outside designated lanes
City's slump
L - Juventus, 2-0
D - C Palace, 2-2
W - N Forest, 3-0
L - Liverpool, 2-0
D - Feyenoord, 3-3
L - Tottenham, 4-0
L - Brighton, 2-1
L - Sporting, 4-1
L - Bournemouth, 2-1
L - Tottenham, 2-1
if you go
The flights Fly Dubai, Air Arabia, Emirates, Etihad, and Royal Jordanian all offer direct, three-and-a-half-hour flights from the UAE to the Jordanian capital Amman. Alternatively, from June Fly Dubai will offer a new direct service from Dubai to Aqaba in the south of the country. See the airlines’ respective sites for varying prices or search on reliable price-comparison site Skyscanner.
The trip
Jamie Lafferty was a guest of the Jordan Tourist Board. For more information on adventure tourism in Jordan see Visit Jordan. A number of new and established tour companies offer the chance to go caving, rock-climbing, canyoning, and mountaineering in Jordan. Prices vary depending on how many activities you want to do and how many days you plan to stay in the country. Among the leaders are Terhaal, who offer a two-day canyoning trip from Dh845 per person. If you really want to push your limits, contact the Stronger Team. For a more trek-focused trip, KE Adventure offers an eight-day trip from Dh5,300 per person.
David Haye record
Total fights: 32
Wins: 28
Wins by KO: 26
Losses: 4
Day 1, Abu Dhabi Test: At a glance
Moment of the day Dimuth Karunaratne had batted with plenty of pluck, and no little skill, in getting to within seven runs of a first-day century. Then, while he ran what he thought was a comfortable single to mid-on, his batting partner Dinesh Chandimal opted to stay at home. The opener was run out by the length of the pitch.
Stat of the day - 1 One six was hit on Day 1. The boundary was only breached 18 times in total over the course of the 90 overs. When it did arrive, the lone six was a thing of beauty, as Niroshan Dickwella effortlessly clipped Mohammed Amir over the square-leg boundary.
The verdict Three wickets down at lunch, on a featherbed wicket having won the toss, and Sri Lanka’s fragile confidence must have been waning. Then Karunaratne and Chandimal's alliance of precisely 100 gave them a foothold in the match. Dickwella’s free-spirited strokeplay meant the Sri Lankans were handily placed at 227 for four at the close.
Company profile
Date started: 2015
Founder: John Tsioris and Ioanna Angelidaki
Based: Dubai
Sector: Online grocery delivery
Staff: 200
Funding: Undisclosed, but investors include the Jabbar Internet Group and Venture Friends
The Birkin bag is made by Hermès.
It is named after actress and singer Jane Birkin
Noone from Hermès will go on record to say how much a new Birkin costs, how long one would have to wait to get one, and how many bags are actually made each year.
Plan to boost public schools
A major shake-up of government-run schools was rolled out across the country in 2017. Known as the Emirati School Model, it placed more emphasis on maths and science while also adding practical skills to the curriculum.
It was accompanied by the promise of a Dh5 billion investment, over six years, to pay for state-of-the-art infrastructure improvements.
Aspects of the school model will be extended to international private schools, the education minister has previously suggested.
Recent developments have also included the introduction of moral education - which public and private schools both must teach - along with reform of the exams system and tougher teacher licensing requirements.
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Ferrari 12Cilindri specs
Engine: naturally aspirated 6.5-liter V12
Power: 819hp
Torque: 678Nm at 7,250rpm
Price: From Dh1,700,000
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COMPANY PROFILE
Name: Lamsa
Founder: Badr Ward
Launched: 2014
Employees: 60
Based: Abu Dhabi
Sector: EdTech
Funding to date: $15 million
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
UAE currency: the story behind the money in your pockets
The candidates
Dr Ayham Ammora, scientist and business executive
Ali Azeem, business leader
Tony Booth, professor of education
Lord Browne, former BP chief executive
Dr Mohamed El-Erian, economist
Professor Wyn Evans, astrophysicist
Dr Mark Mann, scientist
Gina MIller, anti-Brexit campaigner
Lord Smith, former Cabinet minister
Sandi Toksvig, broadcaster
