CBUAE Maintains Base Rate at 3.65%

The CBUAE (Central Bank of the UAE) has announced its decision to maintain the Base Rate applicable to the ODF (Overnight Deposit Facility) at 3.65%. This decision follows the US FED( Federal Reserve) move to keep interest rates unchanged at its January 2026 meeting.

For business owners and entrepreneurs operating in the UAE, understanding these monetary policy decisions is important for financial planning, cash flow management, and decision-making.

Why the CBUAE Follows the Federal Reserve

The AED has been pegged to the USD since 1997 at a fixed exchange rate of approximately 3.6725 AED to 1 USD. This currency peg means that the CBUAE typically mirrors the FED’s interest rate decisions to maintain monetary stability and support the AED’s value.

The Base Rate serves as the benchmark for overnight money market interest rates in the UAE. It shows the general stance of monetary policy and directly influences borrowing costs across the country.

In addition to holding the Base Rate steady, the CBUAE confirmed that the interest rate for borrowing short-term liquidity through all standing credit facilities will remain at 50 basis points above the Base Rate.

This framework governs how banks access funding from the Central Bank and ultimately affects the rates they offer to businesses and consumers.

Investor Base Continues to Expand

DFM attracted 97,394 new investors during 2025, with 84% of these coming from outside the UAE. Foreign investors accounted for 51% of total trading value, while institutional investors represented 71% of all trading activity. The total investor base now stands at 1.25 million.

This diversified investor composition signals continued international confidence in Dubai as a destination for capital deployment. For businesses operating in or considering entry to the UAE market, these suggest a financial environment with strong liquidity and institutional backing.

Context: A Pause After Three Consecutive Cuts

This decision to hold rates steady marks a pause following three consecutive rate cuts in 2025. The FED reduced rates in September, October, and December of last year, with the CBUAE matching each reduction. The most recent cut in December 2025 brought the Base Rate down from 3.90% to its current level of 3.65%.

The FED’s January 2026 meeting resulted in a 10-2 vote to maintain rates in the 3.50% to 3.75% range.

Most economists now expect limited rate reductions in 2026, with futures markets pricing in at most two cuts for the year. This suggests that the current rate environment may persist for some time.

What This Means for UAE Businesses

For businesses operating in the UAE, the decision to hold rates steady has several practical implications.

Borrowing Costs Remain Stable

Companies with existing variable-rate loans will not see immediate changes to their interest payments. Those considering new financing can plan with greater certainty, knowing that rates are unlikely to shift dramatically in the near term. Business loan interest rates in the UAE typically range between 5% and 15% annually, depending on the lender, loan type, and the borrower’s risk profile.

Cash Flow Planning

Stable interest rates make it easier to forecast expenses and manage cash flow. Businesses that took advantage of the rate cuts in late 2025 to secure financing are now in a stronger position, as they locked in lower rates before the pause.

Gradual Easing May Continue

While the FED has signalled caution, the overall direction remains towards gradual easing rather than increases. This means borrowing costs could continue to drift lower over time, though the pace will be measured. Different types of financing products will adjust at different speeds, with variable-rate products typically responding first.

Real Estate and Property Decisions

For businesses considering commercial property purchases or relocations, stable rates provide a window for planning. The UAE real estate market has maintained strong momentum, supported by population growth and sustained international investor interest.

Future Outlook

The CBUAE’s decision shows a broader trend of central banks taking a cautious approach in 2026. With inflation still above target levels in major economies and global uncertainties persisting, monetary policymakers are choosing stability over aggressive action.

For UAE businesses, this environment offers predictability. Companies can focus on operational growth and strategic investments without worrying about sudden shifts in borrowing costs.

The next scheduled FED meeting will provide further clarity on the interest rate outlook. Until then, businesses should take advantage of the current stability to review their financing arrangements, assess expansion opportunities, and ensure their financial foundations are solid.