CBK cuts discount rate from 3% to 2.75%

CBK policy decisions driven by overall economic performance ratios: Dr Hashel

Governor Dr Mohammad Y Al-Hashel

KUWAIT: In light of the Central Bank of Kuwait’s (CBK) mandate to maintain monetary and financial stability, the Board of Directors decided yesterday to lower the discount rate from 3.0 percent to 2.75 percent. The decision fulfils the dual objectives of promoting non-inflationary economic growth conditions in non-oil sectors, and ensuring the continued attractiveness and the competitiveness of the national currency as a reliable store of domestic savings, both of which are mainstays of monetary policy.

Governor Dr Mohammad Y Al-Hashel, announced that the decision is based on a thorough analysis of economic, financial and banking developments, in addition to the interest rate trajectories of major currencies and The Fed’s decision on Wednesday to cut the interest rate for the third time this year.

A healthy margin in favor of the KWD against the USD allowed for a discount rate cut that maintains the attractiveness of the national currency. Meanwhile, the lower lending cost shall drive credit off-take by productive economic sectors and provide an enabling investment environment that motivates aggregate demand and supports non-oil GDP growth.

Dr Al-Hashel stated that CBK monetary policy decisions are driven by overall economic performance ratios, domestic liquidity indicators, developments in Banks’ deposits and credit, and interest rates on the Kuwaiti dinar and on major currencies lead by the US dollar. This data indicates whether a change to the local interest rates is indeed required, as well the direction and magnitude of this change and the suitable instruments to effect it. The CBK Governor concluded his statement by stressing the Bank’s unwavering policy of vigilant follow up on economic, monetary and banking developments and of sustained readiness to act when necessary to enhance the attractiveness and competitiveness of the national currency and to foster an atmosphere conducive to sustainable economic growth.

Meanwhile, Saudi Arabia lowered its repo rate by a quarter-point to 2.25 per cent, and its reverse repo rate by the same amount to 1.75 per cent. The United Arab Emirates and Bahrain also cut benchmark rates by 25 points.