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|12 June, 2018

UAE's key interest rates may go up

US Federal Reserve expected to increase rates in Wednesday meeting

Image used for illustrative purpose. United Arab Emirates dirham.

Image used for illustrative purpose. United Arab Emirates dirham.

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Key interest rates in the UAE are likely to go up from tomorrow (Thursday) as the US Federal Reserve is expected to increase rates in today's (Wednesday) meeting.

"We see most GCC central banks raising their benchmark rates in line with the Fed. The Central Bank of the UAE is expected to increase its repo rate (lending rate) by 25bps to 2.25 per cent," Monica Malik, chief economist, Abu Dhabi Commercial Bank said in a note.

The policymaking Federal Open Market Committee of the US is widely expected to raise the rates by 25bps to 2 per cent on Wednesday evening.

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Anita Yadav, head of fixed income research at Emirates NBD, also said in a note that FOMC is widely expected to raise rates by another 25 basis points.

The UAE raised interest rates on certificates of deposits by 25 basis points in March 2018 to 2 per cent. Certificates of deposit, which the UAE Central Bank issues to banks operating in the country, are the monetary policy instrument through which changes in interest rates are transmitted to the UAE banking system.

In the GCC, Saudi Arabia Monetary Authority is also likely to hike by the same magnitude. However, Qatar will again keep its benchmark lending rates steady at five per cent, Monica Malik said.

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