UAE Central Bank Holds Its Base Rate at 3.9%: What It Means for Founders' Borrowing Costs

DUBAI — Borrowing costs for UAE businesses are not coming down yet. On Wednesday, October 28, the Central Bank of the UAE (CBUAE) decided to keep its Base Rate at 3.9%, following the US Federal Reserve’s decision the same day to leave its own rates unchanged, according to the Emirates News Agency (WAM).

The CBUAE also kept the rate for borrowing short-term liquidity from the central bank at 50 basis points above the Base Rate for all standing credit facilities, or 4.40%, as Economy Middle East noted.

How We Got Here

The hold follows a hike. On September 16 the CBUAE raised the Base Rate by 25 basis points, from 3.65% to 3.9%, effective September 17, after the Fed raised its Interest Rate on Reserve Balances (IORB), Gulf News reported. Economy Middle East described that move as the Fed’s first US rate increase since 2023.

The link is structural. The dirham is pegged to the US dollar, at roughly AED 3.67, so the CBUAE ties its Base Rate to the Fed’s IORB and typically moves in step with Washington.

In Washington, the Federal Open Market Committee kept the federal funds target range at 3.75%–4.00% in a 10–2 vote, Economy Middle East reported. Two policymakers, Governor Lisa Cook and Cleveland Fed President Beth Hammack, dissented in favour of another 25-basis-point increase.

The Rate Your Bank Actually Uses

The Base Rate is an overnight central bank rate, not the rate on your company’s loan. Many UAE business facilities are priced off the Emirates Interbank Offered Rate (EIBOR) plus a margin. According to CBUAE data cited by Economy Middle East, EIBOR on October 28 stood at:

• Overnight: 3.60720%
• One month: 4.09378%
• Three months: 4.31471%
• Six months: 4.78987%
• One year: 4.91104%

A facility priced at three-month EIBOR plus a margin, for example, starts from more than 4.3% before the bank adds its spread. The longer tenors sit well above the Base Rate, which suggests markets are pricing in the possibility of higher rates ahead. That last point is our reading of the curve, not a forecast.

Floating-rate loans tied to EIBOR reset as the benchmark moves, while existing fixed-rate borrowing does not change automatically when the central bank acts.

What Comes Next

The Fed’s next decision is due on December 9, at the end of its December 8–9 meeting, per the Federal Reserve’s calendar. Because the CBUAE tracks the Fed, that date matters for UAE borrowers.

Khaleej Times reported that the analyst consensus is for a 25-basis-point US hike in December, and quoted Vijay Valecha, chief investment officer at Century Financial, as saying: “Data since the September hike makes a case for both sides.” He added that signs of cooling in the US labour market support “a cautious, wait-and-see approach.”

What Banks Say About SME Lending

The latest official read on credit conditions is the CBUAE’s Credit Sentiment Survey for Q2 2026, which surveys senior credit officers. It reflects bankers’ opinions, not CBUAE views. Its findings for small and medium-sized enterprises:

• SME loan demand was the most sensitive of any borrower group, with a net balance of -7.0 percentage points in the June quarter.
• Business loan rejection rates rose overall, more for large firms, “although rejection rates also rose for SMEs.”
• Banks reported tighter collateral requirements, higher premiums on riskier loans and wider spreads.
• Looking ahead, banks expected SME loan demand to rebound in the September quarter, with a net balance of +22.2 percentage points, the largest improvement among firm types. Banks also expected their appetite to lend to SMEs to rise, at +11.8 points.

The Q3 survey, which would show whether that rebound happened, had not been published as of October 30.

What Founders Should Do Now

This is our editorial guidance, not financial advice. Talk to your bank or adviser about your own situation.

• Know your benchmark. Check whether your credit line, trade finance or term loan is fixed or floating, which EIBOR tenor it uses and when it resets.
• Stress-test December. Model what another 25-basis-point rise would do to your monthly interest bill. It is a modest move, but it compounds on top of September’s hike.
• Negotiate collateral and margin, not just rate. Banks told the CBUAE that collateral requirements and spreads were tightening. Those terms may have more room for negotiation than the benchmark.
• Put idle cash to work. Higher rates cut both ways. If your company holds cash reserves, compare what your bank pays on call or fixed deposits.
• Time big borrowing decisions carefully. If you are planning equipment finance or a working-capital facility, the December 9 Fed decision is the next point where UAE rates could move.

Figures come from WAM, Gulf News, Economy Middle East, Khaleej Times, the Federal Reserve and the CBUAE as of October 30, 2026. EIBOR rates change daily.