The UAE, Saudi Arabia and Bahrain followed the US with interest rate hike of 0.25 percent on the cost of loans for everything from houses to cars.

The UAE Central Bank announced that effective from today (Dec 14), 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 yesterday.

The Repo Rate applicable to borrowing short-term liquidity from UAE Central Bank against Certificates of Deposits has also been increased by 25 basis points to 1.75%. Certificates of Deposit, which 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.

The US central bank on Wednesday raised the benchmark interest rate for the third and final time this year, and indicated it was not likely to be more aggressive next year, at least for now.

Citing the strong US labour market and solid economy, the Fed’s policy-setting Federal Open Market Committee increased the key lending rate to 1.25-1.5 percent, an increase of a quarter point.

The quarterly forecasts by Fed officials showed no change in the expectations for policy moves in 2018 and 2019, with three rate hikes expected next year and one in the following year, identical to their September projections, indicating they are no more concerned about rising prices.

The Fed’s rate move was widely expected, and there were few changes in the wording of the statement or the economic forecasts for economists to focus on.

RDQ Economics: “This was about as uninteresting a rate hike as one can get with very little in the policy statement or the projections that could be described as surprising.