The Central Bank of the UAE (CBUAE) has decided to raise the base rate applicable to the Overnight Deposit Facility (ODF) by 25 basis points - from 4.65 per cent to 4.90 per cent , effective from Thursday, March 23, 2023.
This decision was taken following the US Federal Reserve Board’s announcement on Wednesday to increase the Interest on Reserve Balances (IORB) by 25 basis points.
The CBUAE also has decided to maintain the rate applicable to borrowing short-term liquidity from the CBUAE through all standing credit facilities at 50 basis points above the Base Rate.
The Base Rate, which is anchored to the US Federal Reserve’s IORB, signals the general stance of the CBUAE’s monetary policy. It also provides an effective interest rate floor for overnight money market rates.
The central banks of Saudi Arabia, Bahrain and Qatar raised their benchmark borrowing rates after the US Federal Reserve raised its key interest rate by 25 basis points tonight.
The Saudi Central Bank raised the rate of Repurchase Agreement (Repo) by 25 basis points to 5.50 percent, and the rate of Reverse Repurchase Agreement (Reverse Repo) by 25 basis points to 5.00 percent.
In Bahrain, the one-week deposit facility rate increased to 5.75% from 5.5% and the overnight deposit rate was raised to 5.5% from 5.25%, Bahrain’s Central Bank tweeted.
The Central Bank of Qatar likewise raised its interest rates by 25 basis points effective on Thursday, hiking deposit, lending and repo rates by 25 bps to 5.25%, 5.75% and 5.5%, respectively.
CBUAE Central Bank Digital Currency strategy launched: The Central Bank of UAE (CBUAE) jointly held a signing ceremony with G42 Cloud and R3 to mark the implementation of the CBUAE Central Bank Digital Currency (CBDC) Strategy, one of the nine initiatives of the CBUAE’s Financial Infrastructure Transformation (FIT) Programme.
The CBUAE has engaged with G42 Cloud and R3 as the infrastructure and technology providers respectively for its CBDC implementation.
Following several successful CBDC initiatives including Project “Aber” with the Saudi Central Bank in 2020, which confirmed the possibility of using a digital currency issued by two central banks to settle cross borders payments and was awarded the Global Impact Award by Central Banking Magazine, in addition to the first real-value cross-border CBDC pilot under the “mBridge” Project with the Hong Kong Monetary Authority, the Bank of Thailand, the Digital Currency Institute of the People’s Bank of China and the Bank for International Settlements in 2022, the CBUAE is now ready for entering into the next major milestone of the CBDC journey and implementing its CBDC Strategy.
The first phase of CBUAE’s CBDC Strategy, which is expected to complete over the next 12 to 15 months; comprises three major pillars, the soft launch of mBridge to facilitate real-value cross-border CBDC transactions for international trade settlement, proof-of-concept work for bilateral CBDC bridges with India, one of the UAE’s top trading partners and finally, proof-of-concept work for domestic CBDC issuance covering wholesale and retail usage.
CBDC is a risk-free form of digital money issued and guaranteed by the central bank and serves as a secure, cost-effective and efficient form of payment and a store of value.
As part of the UAE’s digital transformation, CBDC will help address the pain points of domestic and cross-border payments, enhance financial inclusion and the move towards a cashless society.
It will further strengthen the UAE’s payment infrastructure, providing additional robust payment channels and ensuring a resilient and reliable financial system. More importantly, the CBUAE aims to ensure the readiness of the UAE to integrate the payment infrastructures with the future potential tokenisation world, the tokenisation of financial and non-financial activities.
Khaled Mohamed Balama, the Governor of the CBUAE, said, “CBDC is one of the initiatives as part of the CBUAE’s FIT programme, which will further position and solidify the UAE as a leading global financial hub. The launch of our CBDC strategy marks a key step in the evolution of money and payments in the country. CBDC will accelerate our digitalisation journey and promote financial inclusion. We look forward to exploring the opportunities that CBDC will bring to the wider economy and society.” ]]>
Gold jumps as US Fed signals rate-hike pause imminent. Gold prices climbed on Wednesday after the U.S. Fed toned down its aggressive approach to reining in inflation.
Spot gold was up 1.7% at $1,973.52 per ounce by 3:56 p.m. EDT (1956 GMT), after advancing as much as 2%. U.S. gold futures settled 0.4% higher at $1,949.60 before the Fed announcement, Reuters reported.
The Fed raised interest rates by a quarter of a percentage point, but indicated it was on the verge of pausing further increases in borrowing costs amid recent turmoil in financial markets.
WAM