Why UAE interest rates are more negative than they appear

This Article was published in The National Banks in the UAE pay 1.25 per cent on time deposits with a maturity of one year. While this may look measly, two things matter for consideration here. First, interest rates are still positive in the UAE, unlike Europe where they turned negative. (Yes, some European banks demand interest from depositors.) Second, while the interest received by UAE depositors is positive, this is technically termed as nominal rate. When adjusted for inflation, the real rate of interest gives a different picture. UAE inflation (CPI) is running at 1.8 per cent. After adjusting for inflation, the real rate of interest in the UAE is minus 0.5 per cent. This matters becaus

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