21/09/2025
Share:
21/09/2025
Share:
KUWAIT CITY, Sept 21: In a move that reflects monetary policy directions in confronting the challenges of inflation and slowing growth, the Central Bank of Kuwait announced a 25 basis point cut in interest rates from 4.0 percent to 3.75 percent effective Sept 18, 2025. This is in line with the decision of the US Federal Reserve to take a similar step. The decision sparked widespread debate in economic circles about its repercussions on various sectors in Kuwait, particularly the real estate, investment, and consumer sectors.
A number of economic experts stated that the decision will affect investment properties due to their connection to borrowing and financing costs, and on the economy as a whole. Lower interest rates improve the country’s economic situation because financing becomes available at a lower cost, which supports business expansion and whets the appetite of businesspersons for new investments -- whether in real estate or other sectors, thus stimulating the economy. At the same time, experts warned about the potential risks of the decision, specifically the rising inflation rates if price growth is not controlled.
Economic expert Qais Al-Ghanim believes that the most obvious positive impact of the interest rate cut will be for investment in real estate, considering its close connection to borrowing activity and financing costs. He said that investment in real estate always moves up or down depending on the interest rate. “With every reduction in interest rate, demand for borrowing to purchase housing units or expand investment projects increases, which increases sales and purchase rates and restores vitality to the market,” he elaborated. He added that this step is not limited to the real estate sector alone, as it has a positive impact on the economy as a whole. He explained that whenever interest rates decrease, the economic situation improves, as financing becomes available at a lower cost, which supports business expansion.
He pointed out, “This policy is a vital incentive for businesspersons to enter new investments, whether in real estate or other sectors, thus, stimulating the economy.” He said the delicate balance between encouraging growth and maintaining price stability is the greatest challenge in the current monetary policy, requiring close monitoring and coordination between monetary and fiscal authorities. Economic expert Mohammad Ramadan linked the decision to cut interest rates to rising stock and real estate prices. He stated that “in general, lower interest rates are beneficial to the economy.
When interest rates fall, stock prices rise because corporate profits increase as a result of lower borrowing costs, making new projects more feasible. Real estate prices also rise because financing costs decrease and returns become more attractive.” He explained that the role of the Central Bank is not limited to stimulating growth, as it includes maintaining the value of the Kuwaiti Dinar and controlling inflation rates. He pointed out that the primary function of the Central Bank is to balance the economy, inflation and protect the currency. “Lowering interest rates too much could weaken the currency’s attractiveness and lead to higher inflation.
Therefore, the Central Bank sets appropriate interest rates based on local economic data,” he added. He asserted that Kuwait, unlike some Gulf Cooperation Council (GCC) countries, has flexibility in making its monetary decisions -- free from total dependence on the US Federal Reserve. He said “we previously witnessed the Federal Reserve raising or lowering interest rates, while the Central Bank of Kuwait did not keep pace with these steps, taking into account the specificities of the local economy.
This reflects the independence of monetary decision-making in Kuwait.” Legal and economic researcher Imad Al-Oqab emphasized that Central Bank decisions are considered a pillar of fiscal and monetary policies in any country, indicating that reducing interest rates is part of a broader strategy to stimulate the Kuwaiti economy in the face of global and regional challenges. He affirmed that lowering interest rates contributes to reducing the cost of borrowing and increasing liquidity in the financial system, which stimulates investment and consumer spending. He was quick to add though that it has potential risks, specifically rising inflation rates if price growth is not controlled.
By Marwa Al-Bahrawi
Al-Seyassah/Arab Times Staff
Al-Seyassah/Arab Times Staff
