Following the US Federal Reserve decision to hike interest rates, the UAE Central Bank also raised interest rates late on Wednesday.

"The Central Bank of the UAE (CBUAE) announced that, effective, Thursday December 20, 2018, it will raise interest rates applied to the issuance of its Certificates of Deposits in line with the increase in interest rates on US dollar, following the Federal Reserve Board's decision to increase the Federal Funds Rate by 25 basis points at its meeting of today," the apex bank said in a statement.

The Repo Rate applicable to borrowing short-term liquidity from CBUAE against Certificates of Deposits has also been increased by 25 basis points, it said.

Certificates of Deposit, which the UAE Central Banks 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.

As expected, the Federal raised interest rates on Wednesday but forecast fewer rate hikes next year and signalled its tightening cycle is nearing an end in the face of financial market volatility and slowing global growth.

The rate hike, the fourth of 2018, lifted the target range for the Fed's benchmark overnight lending rate by a quarter of a percentage point to a range of 2.25 per cent to 2.50 per cent.

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