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- Abu Dhabi – Abdul Hai Mohammed
Dated:
July 31, 2019
Yesterday, Iber interbank interest rates were mixed: long-term interest rates for one year hit their lowest level this month and interest rates fell, while overnight interest rates fell. day, at 3 and 6 months have increased.
Experts pointed to the "economic statement" according to which banks and financial markets are expecting a Fed decision to cut interest rates by a quarter of a point, pointing out that the The economy of the UAE took advantage of any decision to reduce US rates, a similar decision due to the attachment of the dirham to the dollar.
Short-term overnight interest rates went from 2.152% the day before to 2.22285% yesterday. The interest rate for a week went from 2.3265% yesterday to 2.4108% yesterday.
The interest rate for the 3 months reached 2.776100% against 2.66670% and the 6-month interest rate of 2.79.000% yesterday at 2.72%, while the interest rate for the month went from 2.4707% to 2.44473%. In progress.
"UAE banks and financial markets are expecting a decision from the Federal Reserve to cut interest rates by a quarter of a percentage point," said Mohammed Ali Yasin, chief strategist and client at Al Dhabi Bank. "This reduction will also be expected for UAE interest rate .The dirham is pegged to the dollar." He explained that the decline would be within 25 basis points and that we will see after the announcement of the Federal Reserve and the Central Bank of the United Arab Emirates.
Experiences
He pointed out that the expected rate reduction would not affect the UAE banks but that this reduction could have a negative impact on the banks' net interest margin, which puts pressure on the banks, but situation is quite different. Confirmation that their profit margin will not decrease primarily in the form of low interest rates, as they have certain mechanisms to maintain a good profit margin.
He pointed out that this reduction brings us back to the phase of quantitative easing and the completion of the banks' focus on customer loans, which will provide more liquidity. at a lower cost and significantly reduce the cost of loans to borrowers, which would lighten their burden and offer them better purchasing power.
Tourism
He pointed out that the decision to reduce the event would have a positive impact on the economy of the United Arab Emirates, where the tourism sector would benefit greatly, the weakening of the dollar and the dirhams in front of many International currencies would contribute to the increase in the number of tourists in the UAE for the low cost of their visit to that state.
The loans
Wadah Al-Taha, a member of the European Institute for Corporate Governance, expressed hope that the Fed's expected decision will spill over into the UAE's banking sector, which will reduce immediately interest rates from current and potential customers and businesses. This will lead to a recovery of loans, and we will see additional loans for both consumption and investment and the UAE economy will be the beneficiary.
He noted that the sharp decline in interest rates over one year was due to a number of reasons, including banks' cautiousness to extend longer lending, and reluctance and reluctance by clients to lend for longer periods of time. and hence the long-term loan process enjoyed by banks.
He pointed out that the interest rates of the UAE banks were high, which discouraged many customers from borrowing, which was detrimental to the general situation of the economy, characterized by a decline in the consumption and investment, including huge deposits, which are concentrated at a high cost. More than 2% of banks try to lend their customers more money to make profits, but lower interest rates will not hurt the banks that should encourage them because they have a very good profit margin that can create new cuts to stimulate them.
Normal fluctuation
The volatility of the Ibor price between the rise and fall of yesterday and the duration of the month is normal for several reasons, including the expected decision of the Federal Reserve, the liquidity position of the banks as well as the rates US Treasury bond interest and the recent link with long-term interest rates for one year.
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