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Kuwait Central Bank keeps the discount rate at 2.75%

CBK Governor and Board Chairman Dr Mohammad Al-Hashel

KUWAIT: The Central Bank of Kuwait (CBK) has decided to keep the discount rate at its current value 2.75 percent, a fixed rate since March 16. CBK’s board of directors decided to continue employing the available measures and materials that aim at ensuring the competitiveness and attractiveness of the Kuwaiti Dinar as a store of domestic savings, CBK Governor and

Board Chairman Dr Mohammad Al-Hashel said yesterday.
These savings constitute a major source of funding provided by the local banking and financial units to the various sectors of the national economy and thus maintain a supporting environment for sustainable economic growth and development, Al-Hashel pointed out. The decision is also based on continuous monitoring by CBK of the domestic market, taking into consideration movements in interest rates on major international currencies, he added. He also said that CBK is keen on monitoring latest developments in domestic economic, monetary, and banking fields, in addition to latest updates regarding US Dollar’s interest rate directions.

Kuwait refrained from following the US Federal Reserve’s interest-rate increase for the first time since 2015, citing “modest” economic growth in the Gulf country hit by lower oil prices. Saudi Arabia, the United Arab Emirates and Bahrain mirrored the US Fed’s decision, raising their key rates by quarter of a percentage point. Kuwait pegs the dinar to a basket of currencies believed to be dominated by the dollar, while other members of the six-nation Gulf Cooperation Council are pegged to the greenback.

Kuwait Central Bank said the decision reflected the “limited economic growth and the continued increase of interest rates on the US dollar and all the challenges that entails.” The Central Bank, he said, was also deploying other tools to “boost the attractiveness” of the dinar as a currency for local savings. Gulf Arab countries are struggling to bolster economic growth as oil prices fall and a strong dollar hurts industries such as tourism.

Countries that have a wide interest-rate gap with the Fed “will look to keep benchmark lending rates on hold,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. Saudi Arabia’s Central Bank raised its reverse repurchase rate by 25 basis points to 1.25 percent while keeping the repo rate unchanged at 2 percent. “With a lackluster growth environment, the region doesn’t need higher interest rates,” Malik said. Kuwait has raised its key rate by 75 basis points since the Fed started increasing its borrowing costs in December 2015.- Agencies

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