The Central Bank of Bahrain (CBB) announced its decision to maintain the overnight deposit interest rate unchanged at 4.25%. It comes as part of the review conducted by the CBB to maintain monetary and financial stability in the Kingdom of Bahrain in light of global financial market developments, said the kingdom's Central Bank in a statement.

This decision was taken following the US Federal Reserve’s announcement today to keep the Interest Rate on Reserve Balances (IORB) unchanged, despite three members of the Federal Open Market Committee calling for a quarter-percentage-point increase.

It maintained its benchmark interest rate in a target range of 3.50 percent to 3.75 percent, while its newly appointed Chair, Kevin Warsh, rejected suggestions that he was hesitant to act against rising prices.

In a statement, the Federal Reserve said inflation remained relatively elevated compared with its 2 percent target, partly reflecting supply shocks in certain sectors, including energy. It added that the unemployment rate had also shown little change.

The central bank said economic activity continued to expand at a moderate pace, while the labour market remained resilient. However, it noted that uncertainty surrounding the economic outlook remained elevated, stressing that future monetary policy decisions would continue to depend on incoming economic data and assessments of inflation, labour market conditions and risks to the economy.

UAE too decided to maintain the Base Rate applicable to the Overnight Deposit Facility (ODF) at 3.65%.

The Central Bank of UAE (CBUAE) also decided to maintain the interest rate applicable to borrowing short-term liquidity from the CBUAE at 50 basis points above the Base Rate for all standing credit facilities.

The Base Rate, which is anchored to the US Federal Reserve’s IORB, signals the general stance of monetary policy and provides an effective floor for overnight money market interest rates in the UAE.