The Abu Dhabi skyline. Reuters
The Abu Dhabi skyline. Reuters
The Abu Dhabi skyline. Reuters
The Abu Dhabi skyline. Reuters

UAE Central Bank holds base rate as Fed hits pause


Massoud A Derhally
  • English
  • Arabic

The UAE Central Bank maintained its benchmark borrowing rate as the US Federal Reserve paused its tightening cycle after having increased interest rates to their highest in 16 years to tame inflation and restore price stability.

The Fed, which increased its benchmark rate for the tenth consecutive time last month, maintained it range of 5 per cent to 5.25 per cent.

The Fed has raised rates by combined 500 basis points over the past 15 months, their highest since 2007, shortly before the start of the 2008 global financial crisis. It is pausing now to assess the effects of the tightening cycle on the economy.

The US central bank has raised rates aggressively to bring inflation down to its target range of 2 per cent after prices hit a four-decade high of 9.1 per cent in June of last year.

Data released on Tuesday showed that US inflation had cooled to an annual 4 per cent in May, from 4.9 per cent, the lowest level since March 2021. Meanwhile, core inflation, which excludes food and energy, softened to 5.3 per cent, from 5.5 per cent.

The latest reading from the US on prices "laid the foundation for no action from the Fed today in terms of an interest rate hike" said Naeem Aslam, chief investment officer at Zaye Capital Markets.

"Traders would like to see the Fed take the summer off and sit on the beach. They have been increasing the interest rate very aggressively, and the fruit of their labour is clearly showing in the inflation data.

David Kohl, chief economist at Julius Baer said the Swiss bank expects "further tightening of US credit dynamics in the coming weeks and lower inflation readings in the coming months, which should convince the Fed to refrain from further rate hikes".

Most central banks in the GCC follow the Fed's policy rate moves due to their currencies being pegged to the US dollar, with Kuwait the only exception in the six-member economic bloc as its dinar is linked to a basket of currencies.

The UAE Central Bank kept its benchmark borrowing rate, its base rate for the overnight deposit facility, at 5.15 per cent.

It maintained the rate applicable to borrowing short-term liquidity from the regulator through all standing credit facilities at 50 bps above the base rate.

The base rate, which is anchored to the Fed's interest on reserve balances (IORB), signals the general stance of the Central Bank’s monetary policy and provides an effective interest rate floor for overnight money market rates.

The UAE economy grew by about 7.6 per cent last year, the highest in 11 years, after expanding 3.9 per cent in 2021.

It is projected to grow 3.9 per cent in 2023 and 4.3 per cent in 2024, according to the Central Bank.

Inflation in the Emirates was 4.8 per cent in 2022 and is projected at 3.2 per cent and 2.8 per cent in 2023 and 2024, respectively, according to the Central Bank's Quarterly Economic Review 2022.

That compares with a global inflation rate of 8.7 per cent in 2022. Global inflation will decrease to 7 per cent this year and 4.9 per cent in 2024, according to International Monetary Fund estimates.

In April, the Institute of International Finance projected an even lower UAE inflation rate of 2.4 per cent in 2023, supported by lower global commodity prices and manufacturing unit value.

Despite tighter global financial conditions, the UAE's non-hydrocarbon real growth will remain strong at 4.8 per cent this year, the Washington-based institute said.

That is above the 4.2 per cent estimate of the Central Bank for this year and the 4.6 per cent forecast for 2024.

Annual oil gross domestic product growth has been forecast at 3 per cent and 3.5 per cent in 2023 and 2024, respectively, according to the Central Bank.

“Rising interest rates will have limited impact on economic activity in the UAE,” the IIF said.

UAE banks remain adequately capitalised while the loan-to-deposit ratio edged down to 86 per cent in December 2022, according to the IIF.

Net foreign assets of commercial banks more than doubled to $104 billion at the end of 2022.

The Emirates remains the main regional destination of foreign direct investment inflows, attracting about $22 billion in 2022 or about 4.4 per cent of GDP, one of the highest among emerging economies, according to the IIF.

The Central Bank of Qatar also held its policy rate, with its repo rate maintained at 5.75 per cent, its deposit rate at 5.5 per cent and the lending rate at 6 per cent.

Springtime in a Broken Mirror,
Mario Benedetti, Penguin Modern Classics

 

LA LIGA FIXTURES

Friday Athletic Bilbao v Celta Vigo (Kick-off midnight UAE)

Saturday Levante v Getafe (5pm), Sevilla v Real Madrid (7.15pm), Atletico Madrid v Real Valladolid (9.30pm), Cadiz v Barcelona (midnight)

Sunday Granada v Huesca (5pm), Osasuna v Real Betis (7.15pm), Villarreal v Elche (9.30pm), Alaves v Real Sociedad (midnight)

Monday Eibar v Valencia (midnight)

Dubai World Cup nominations

UAE: Thunder Snow/Saeed bin Suroor (trainer), North America/Satish Seemar, Drafted/Doug Watson, New Trails/Ahmad bin Harmash, Capezzano, Gronkowski, Axelrod, all trained by Salem bin Ghadayer

USA: Seeking The Soul/Dallas Stewart, Imperial Hunt/Luis Carvajal Jr, Audible/Todd Pletcher, Roy H/Peter Miller, Yoshida/William Mott, Promises Fulfilled/Dale Romans, Gunnevera/Antonio Sano, XY Jet/Jorge Navarro, Pavel/Doug O’Neill, Switzerland/Steve Asmussen.

Japan: Matera Sky/Hideyuki Mori, KT Brace/Haruki Sugiyama. Bahrain: Nine Below Zero/Fawzi Nass. Ireland: Tato Key/David Marnane. Hong Kong: Fight Hero/Me Tsui. South Korea: Dolkong/Simon Foster.

The specs

Engine: 2.3-litre, turbo four-cylinder

Transmission: 10-speed auto

Power: 300hp

Torque: 420Nm

Price: Dh189,900

On sale: now

OTHER IPL BOWLING RECORDS

Best bowling figures: 6-14 – Sohail Tanvir (for Rajasthan Royals against Chennai Super Kings in 2008)

Best average: 16.36 – Andrew Tye

Best economy rate: 6.53 – Sunil Narine

Best strike-rate: 12.83 – Andrew Tye

Best strike-rate in an innings: 1.50 – Suresh Raina (for Chennai Super Kings against Rajasthan Royals in 2011)

Most runs conceded in an innings: 70 – Basil Thampi (for Sunrisers Hyderabad against Royal Challengers Bangalore in 2018)

Most hat-tricks: 3 – Amit Mishra

Most dot-balls: 1,128 – Harbhajan Singh

Most maiden overs bowled: 14 – Praveen Kumar

Most four-wicket hauls: 6 – Sunil Narine

 

UAE Premiership

Results

Dubai Exiles 24-28 Jebel Ali Dragons
Abu Dhabi Harlequins 43-27 Dubai Hurricanes

Final
Abu Dhabi Harlequins v Jebel Ali Dragons, Friday, March 29, 5pm at The Sevens, Dubai

One in nine do not have enough to eat

Created in 1961, the World Food Programme is pledged to fight hunger worldwide as well as providing emergency food assistance in a crisis.

One of the organisation’s goals is the Zero Hunger Pledge, adopted by the international community in 2015 as one of the 17 Sustainable Goals for Sustainable Development, to end world hunger by 2030.

The WFP, a branch of the United Nations, is funded by voluntary donations from governments, businesses and private donations.

Almost two thirds of its operations currently take place in conflict zones, where it is calculated that people are more than three times likely to suffer from malnutrition than in peaceful countries.

It is currently estimated that one in nine people globally do not have enough to eat.

On any one day, the WFP estimates that it has 5,000 lorries, 20 ships and 70 aircraft on the move.

Outside emergencies, the WFP provides school meals to up to 25 million children in 63 countries, while working with communities to improve nutrition. Where possible, it buys supplies from developing countries to cut down transport cost and boost local economies.

 

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What's in the deal?

Agreement aims to boost trade by £25.5bn a year in the long run, compared with a total of £42.6bn in 2024

India will slash levies on medical devices, machinery, cosmetics, soft drinks and lamb.

India will also cut automotive tariffs to 10% under a quota from over 100% currently.

Indian employees in the UK will receive three years exemption from social security payments

India expects 99% of exports to benefit from zero duty, raising opportunities for textiles, marine products, footwear and jewellery

List of alleged parties

 

May 12, 2020: PM and his wife Carrie attend 'work meeting' with at least 17 staff 

May 20, 2020: They attend 'bring your own booze party'

Nov 27, 2020: PM gives speech at leaving party for his staff 

Dec 10, 2020: Staff party held by then-education secretary Gavin Williamson 

Dec 13, 2020: PM and his wife throw a party

Dec 14, 2020: London mayoral candidate Shaun Bailey holds staff event at Conservative Party headquarters 

Dec 15, 2020: PM takes part in a staff quiz 

Dec 18, 2020: Downing Street Christmas party 

BUNDESLIGA FIXTURES

Saturday, May 16 (kick-offs UAE time)

Borussia Dortmund v Schalke (4.30pm) 
RB Leipzig v Freiburg (4.30pm) 
Hoffenheim v Hertha Berlin (4.30pm) 
Fortuna Dusseldorf v Paderborn  (4.30pm) 
Augsburg v Wolfsburg (4.30pm) 
Eintracht Frankfurt v Borussia Monchengladbach (7.30pm)

Sunday, May 17

Cologne v Mainz (4.30pm),
Union Berlin v Bayern Munich (7pm)

Monday, May 18

Werder Bremen v Bayer Leverkusen (9.30pm)

Updated: June 15, 2023, 6:30 AM