The Central Bank of the UAE (CBUAE) has decided to keep its interest rates unchanged following the US Federal Open Market Committee’s (FOMC) move to leave the benchmark rates steady in the range of 5.25%-5.5%.

"CBUAE has decided to maintain the Base Rate applicable to the Overnight Deposit Facility (ODF) without change at 5.40%. This decision was taken following the US Federal Reserve’s announcement on 20 March to keep the Interest on Reserve Balances (IORB) unchanged," the UAE central bank said in a statement shortly after the Fed's announcement.

"The CBUAE has also decided to maintain the interest rate applicable to borrowing short-term liquidity from the CBUAE at 50 basis points above the Base Rate for all standing credit facilities," the statement said.

The FOMC noted that inflation has eased over the past year but remains elevated. It seeks to achieve maximum employment and inflation at the rate of 2% over the longer run.

Economic activity has been expanding at a solid pace. Job gains have remained strong, and the unemployment rate has remained low, the FOMC said in its statement.

The dot plot of FOMC rate median projections shows three quarter-point cuts in 2024, Bloomberg reported. The next FOMC meeting will be on April 30/May 1. 

Speaking to reporters in a press conference after the announcement, US Fed Chairman Jerome Powell said that the first reduction will likely be “at some point this year.”

(Writing by Seban Scaria seban.scaria@lseg.com; editing by Daniel Luiz)