The Central Bank of the UAE (CBUAE) and Qatar Central Bank (QCB) have decided to keep interest rates unchanged, following the US Federal Reserve’s decision on Wednesday to keep benchmark lending rate at its current level for the seventh time in a row.

The US Federal Reserve voted unanimously to maintain the target range for the fed funds rate at 5.25% - 5.50%.

The CBUAE has decided to maintain the interest rate applicable to the Overnight Deposit Facility (ODF) at 5.40%.

It 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 Base Rate, which is anchored to the US Federal Reserve’s IORB, signals the general stance of monetary policy and provides an effective floor for overnight money market interest rates in the UAE.

According to a QCB statement on X, interest rates for deposit (QCBDR), lending (QCBLR) and repo (QCBRR) have been held in line with US federal Reserve.

The interest rates would remain as: QCBDR (5.75%), QCBLR (6.25%) and QCBRR (6%), based on an assessment of Qatar’s current monetary policies.

Outlook on economy, inflation

The Consumer Price Index showed no increase in May - indicating that inflation cooled at a slower pace than expected - though it rose 3.3% from a year ago.

The Federal Open Market Committee (FOMC) aims to achieve maximum employment and inflation at the rate of 2% over the longer run.

"Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. In recent months, there has been modest further progress toward the Committee's 2% inflation objective," the FOMC said in a statement.

"The Committee judges that the risks to achieving its employment and inflation goals have moved toward better balance over the past year. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks," the FOMC statement noted.

In a press conference after the end of a two-day policy meeting, Fed Chairman Jerome Powell said that the central bank will not slash rates until it sees more data showing that inflation is cooling.

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