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UAE maintains interest rate following US Federal Reserve decision
June's economic data provided support for the Federal Reserve to keep rates unchanged, expert says
- PUBLISHED: Wed 29 Jul 2026, 10:05 PM UPDATED: Wed 29 Jul 2026, 10:22 PM
UAE consumers are set to enjoy stable borrowing rates, as the Central Bank of the UAE left its benchmark rate unchanged on Wednesday.
In a statement, the apex bank said it has decided to maintain the base rate applicable to the overnight deposit facility at 3.65 per cent.
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The decision was made after the US Federal Reserve decided to continue to hold its federal funds range at 3.5 per cent to 3.75 per cent. The UAE follows US monetary policy as the UAE dirham is pegged to the US dollar.
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In Washington, the Federal Open Market Committee decided to hold rates by a 9 – 3 vote. The FOMC noted that economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East. “Productivity growth and capital investment are strong. Job gains have kept pace with the workforce, and the unemployment rate has changed little,” the FOMC said.
Hamza Dweik, Head of Trading (MENA), Saxo Bank, noted that while inflation has moderated compared with earlier in the year, the recent rebound in oil prices and ongoing Middle East tensions mean policymakers are unlikely to signal any near-term easing.
“A Fed that pauses while retaining a hawkish bias could keep Treasury yields elevated and limit further upside in high-growth technology stocks. Conversely, any indication that policymakers are becoming more comfortable with the inflation outlook could provide support for equities, particularly within the technology sector,” he added.
Vijay Valecha, Chief Investment Officer, Century Financial, stressed that the current economic data have been more favourable than what the Fed had in front of them in June. “Warsh has repeatedly stressed over the past two months that the Fed must restore price stability and convince markets it has not accepted permanently higher inflation. However, he has not explained why current interest rates are sufficient to achieve that. Fed officials favouring another rate hike remain vocal, while some who currently support holding rates have indicated they could back tighter policy later this year,” he added.
Nick Spencer-Skeen, Senior Executive Officer, Lunaro Markets Limited, said that June’s economic data provided support for the Federal Reserve to keep rates unchanged. “Core inflation cooled to 2.6% year-on-year, and payrolls came in at just 57,000 against a forecast of 114,000. What’s kept a hike in play is the dot plot from June, half the Committee still had at least one hike pencilled in for this year, plus oil, which climbed sharply during the worst of the fighting and put the inflation improvement in doubt,” he added.
Madhur Kakkar, CEO and Founder, Elevate Financial Services, said that while inflation has eased from its peak, the Fed still has to balance that against resilient labour conditions and sticky underlying price pressures. “At the same time, signs of slower growth make another hike less straightforward,” he added.
Associate Editor Somshankar Bandyopadhyay brings more than three decades of experience to the KT newsroom. Currently, he manages the news production of the business section, ensuring that the top economic and business news of the day reaches its readers.