The Central Bank of the United Arab Emirates (CBUAE) has decided to raise the Overnight Deposit Facility (ODF) Base Rate by 50 basis points, effective May 5, 2022. The CBUAE has also decided to keep the rate on short-term liquidity borrowed from the CBUAE through all standing credit facilities at 50 basis points over the Base Rate. The CBUAE’s monetary policy is signaled by the Base Rate, which is tied to the IORB of the US Federal Reserve. It also gives overnight money market rates an effective interest rate floor.
Following the US Federal Reserve Board’s announcement on Wednesday that it would raise the Interest on Reserve Balances (IORB) by half a percentage point, the largest increase in 22 years, and that it would begin trimming its bond holdings next month as a further step in the fight against inflation, this decision was made.