Central bank UAE: UAE Central Bank Raises Interest Rates: How Will This Affect Residents?

Central bank UAE: UAE Central Bank Raises Interest Rates: How Will This Affect Residents?
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Following the move by the US Federal Reserve, the UAE central bank raised the base rate by 50 basis points to 2.25%. The new rate came into effect from Thursday. The twelve major central banks in emerging and developing markets raised interest rates in 2021 and began the same process this year to curb inflation. This is the highest level in decades in the US and other major economies in the world. Here’s everything you need to know about the impact of the rate hike on the emirate.

How will the move by the UAE Central Bank affect consumers?

The increase in interest rates will be reflected in the equivalent monthly installments (EMIs) of home, auto and other personal and corporate loans. Consumers have to pay higher EMIs because higher rates can make it more expensive to buy a home / car or carry a credit card balance.

How Much Money Does a Credit Card Make?

Credit card holders with a good credit history will be charged an average interest rate of 18% per annum. It will be subject to increase with each increase in interest rates.

Will customers have to pay more?

Inflation and interest rates will soon be visible to consumers. Credit card users will eventually have to pay more for any revolving debt.

How much is the rate increase likely to be?

The US Fed has indicated it plans to raise rates several times this year. The federal rate is likely to increase a total of five times by 2022 to reach the 1.75 percentage point target this year, including the first increase in March. The federal government plans to bring interest rates back to around 2 percent by 2024.

Will the increase benefit consumers in any way?

The increase in interest rates will also indirectly benefit consumers as banks will gradually increase the profit margins of savings accounts and deposit certificates.

How does rate hike include inflation?

An increase in interest rates will increase control over consumer and business expenses, which will help control consumer prices.

What is the purpose of inflation?

Inflation has doubled in most emerging economies, reaching 7% in developed countries. US federal inflation is projected to rise to two percent a year from 7 percent in 2021.

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