The decision is in line with new level of interbank interest rates of US dollar deposits in international financial markets as from yesterday. Certificates of deposit, which the Central Bank issues to banks operating in the country are the mechanism through which interest rates on UAE dirham are changed in the banking system and which banks use as an indicator for accepting deposits as well as for extending loans to customers. During the course of 40-days, the Central Bank of UAE has revised the interest rates by 0.25 per cent second time, following the readjustments by the Federal Reserve.

The UAE banking industry has welcomed the rise in the base rates saying it was highly expected since the dirham is pegged to the US dollar. A financial wizard while analysing the development discounted any negative impact on the recent corporate performance which has further boosted the business sentiments. He said that since the interest rate was highly political matter in United States because of elections saying that Federal Reserve would not take any chance to an other increase of same magnitude which is  over due as it may have political remifications for the present US administration.

"The cost of finance which is still very low levels is fuelling the UAE economy and creating strong sentiments which has resulted positively in luring the public and private sector to plan out big particularly in real estate sector where most of the bank loans are directed to. The sector has currently $10 billion worth projects which are in different phases of completion in Dubai only, as for banks 6-7 per cent interest is still quite attractive," he said.

The low interest rate regime was also a factor in diverting money into the stock markets thereby boosting the equity prices.The current cost of borrowing is 0.5 per cent below the EBOR while the average cost of lending to an A grade is 1-2 per cent above EBOR.

The current vibrancy in the UAE has its roots in all time high oil earnings, and overall robust economic growth that has taken the economy to stage where these minor adjustments in the certificates of deposits would not put any hurdle in the way of sustained growth levels.

Even an other adjustment of the same size would not affect the current euphoria in business.