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UAE consumers to enjoy stable borrowing costs as Fed holds rates
Central Bank of the UAE announced that it has kept the base rate applicable to the Overnight Deposit Facility (ODF) at 3.65 per cent, the same as last month.
- PUBLISHED: Wed 28 Jan 2026, 11:17 PM
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Consumers in the UAE will continue to enjoy stable interest rates as the UAE Central Bank held its benchmark rate on Wednesday.
In a statement, the Central Bank of the UAE announced that it has kept the base rate applicable to the Overnight Deposit Facility (ODF) at 3.65 per cent, the same as last month.
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The rate was lowered by 25 basis points in December.
Wednesday’s decision follows the decision by the US Federal Reserve to maintain its target range for the federal funds rate is 3.50 per cent to 3.75 per cent. The UAE follows US monetary policy as the UAE dirham is pegged to the US dollar.
After three cuts late last year, analysts say that US policymakers appear to be hitting a pause to reassess a mixed economic picture. Inflation remains higher than target, while the job market is beginning to show signs of cooling. “We expect the Fed to stick with a data‑driven approach, emphasizing that future policy decisions will depend on upcoming inflation and employment data. The political backdrop and the leadership transition later this year add another layer of interest, making Powell’s tone just as important as the actual policy stance.
For investors, today’s meeting serves as a reminder that rate cuts are likely to come slowly and only once inflation is firmly under control. The Fed’s cautious stance suggests markets will continue to react strongly to key economic data and policy comments rather than major shifts in direction in the near term,” said Hamza Dweik, Head of Trading (MENA), Saxo Bank.
Aliasgar Tambawala Co-CIO, Klay Group, expects one to two rate cuts in the second half of the year. “We expect inflation to ease gradually as the effects of earlier rate cuts continue to filter through the economy. We currently expect one to two rate cuts in the second half of the year, although this outlook remains highly sensitive to incoming macroeconomic data and geopolitical developments,” he said.
Looking at the current macroeconomic environment, inflation has declined from its highs and stands at 2.6 per cent as of December 2025, still above the Fed’s 2 per cent target. “Further, the unemployment rate stands at 4.4 per cent. It is slightly higher, but hasn’t surged drastically. Hiring has also slowed, but layoffs remain muted. Equity markets are also at all-time highs, indicating risk-on sentiments amongst investors and positive momentum,” said Vijay Valecha, CIO, Century Financial.
Somshankar Bandyopadhyay is a News Editor with close to three decades of experience. Currently, he manages the business section, ensuring that the top economic and business news of the day reaches its readers.
