The fixed exchange rate system has forced the Central Bank of the UAE (CBUAE) to lower official policy rates, following the US Federal Reserve cutting the US Fed fund rates back in March 2008, and further cutting thereafter in May, October, November, and December 2008.

“The AED is expected to remain pegged to the USD for the foreseeable future,” MubasherTrade highlighted in its 2015 MENA Outlook Report, adding that as of December 2013 the US Federal Reserve has embarked on a series of cuts to its Quantitative Easing (QE) program which is expected to end by 2015.

It is worth noting that the Fed is anticipated to raise the US policy rate later in 2015 or 2016, according to the report.

“At that time, we would expect all GCC rates to witness subsequent hikes in order to preserve their fixed exchange rate regimes,” it said.

Photo Credit: Arabianeye-Reuters