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Citizens of the United Arab Emirates (UAE) will face lower interest costs on their loans during 2024 and 2025, due to an expected decrease of approximately 100 basis points in interest rates.
The Central Bank of the United Arab Emirates (CBUAE) plans to cut interest rates in response to the projected decline in inflation. Analysts in the financial sector predict a positive impact of this reduction in interest applied to personal loans, mortgages, car financing and credit cards.
The UAE's currency is pegged to the U.S. dollar, so the CBUAE tends to align its monetary policy with that of the U.S. Federal Reserve. UU.
The Federal Reserve has kept rates stable during the first half of 2024, as inflation has shown only a slight reduction. However, a greater decline in rates is expected in the context of a global economic improvement, because inflation and unemployment are expected to decrease.
It is anticipated that the United Arab Emirates will follow the trend of the US Federal Reserve. Department of State with regard to the reduction of interest rates, backed by a favorable economic outlook.
A reduction of 25 basis points is expected, placing rates in a range of approximately 5.00% to 5.25%.
Four additional cuts of 25 basis points each are estimated, which would bring rates to between 4.00% and 4.25% at the end of the year.
The evolution of the Internal Rate of Return (TIR) as well will reflect these settings, as interest rate reductions materialize.
The reduction in interest rates will have a variable impact depending on the nature of the loans and their duration.
A stimulus to consumption and investment is expected, which will boost the growth of the real estate market and facilitate the financing of business projects.
Mortgage rates in the UAE will also benefit from this cut, offering lower monthly payments, greater purchasing power and better refinancing opportunities.
In terms of long-term impact, this forecast suggests a positive economic outlook for the United Arab Emirates, as the significant reduction in interest rates in the coming quarters will boost economic growth and financial stability.
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