On 17 June 2026, the Central Bank of the UAE announced it would maintain the Base Rate applicable to the Overnight Deposit Facility (ODF) at 3.65 percent. The decision follows directly from the Federal Reserve's choice to hold its benchmark federal funds rate in the 3.5–3.75 percent target range. Because the dirham is pegged to the US dollar, the UAE central bank typically moves in lockstep with Fed decisions, and this meeting was no exception.
The Fed's accompanying statement removed language that had previously suggested further rate cuts in 2026. Updated quarterly projections show that nine of the eighteen policymakers who submitted forecasts now expect at least one rate increase before the end of 2026. The Fed cited US headline inflation running at 4.2 percent year-on-year — well above its 2 percent target — alongside resilient labour markets, as the basis for a more cautious stance. It also noted that uncertainty linked in part to Middle East conflict is a factor in its assessment.
What this means for our clients
For founders and businesses operating in the UAE, a stable base rate means borrowing costs and deposit yields in dirhams are unlikely to shift in the near term. However, the Fed's revised projections suggest the rate environment could tighten later in the year. Companies carrying dirham-denominated credit facilities, or those planning to raise debt financing in the UAE, should factor the possibility of a higher rate environment into their 2026 cash-flow models. We typically advise clients to review facility terms and any floating-rate exposure before a potential move.
Incoming Fed Chair Kevin Warsh held his first post-meeting press conference on 17 June. Market commentary suggests he may place less weight on detailed forward guidance than his predecessors, which could introduce additional interest-rate volatility over coming months. We will continue to monitor announcements from both the Federal Reserve and the UAE Central Bank and update clients accordingly.
You can read the full source article on Economy Middle East at https://economymiddleeast.com/news/uae-central-bank-maintains-interest-rates-at-3-65-percent-following-feds-first-decision-under-warsh/, or book a consultation with Sirius Consulting to discuss how the current rate environment affects your UAE business or financing plans.