CBK move aims to maintain monetary and fiscal stability
KUWAIT CITY, Oct 31, (KUNA): The Central Bank of Kuwait has decided to cut the discount rate by 0.25 percent to 2.75 percent, the CBK governor announced on Wednesday. “The move aims to maintain the monetary and fiscal stability and support the atmospheres conducive to non-inflationary growth in the non-oil economic sectors,” Dr. Mohammad Al-Hashel said in a statement received by KUNA.
The CBK decision aims to enhance the competitiveness and attractiveness of the local currency as a pool for domestic savings, he pointed out.
“It is made in line with the trajectories of the basic financial policy of the country and in the light of continuous review of the world economic outlook and financial developments, including the interest rate trajectories of major currencies, “It comes a few hours after the US Federal Reserve cut the interest rates for the US dollar,” Dr. Al-Hashel noted. He clarified that the US Federal Reserve’s decision to reduce the dollar interest rate for the third time this year has increased the interest rate margin in favor of the Kuwaiti dinar compared to the US dollar.
The new development has paved the way for cutting the dinar discount rate while keeping an interest rate margin to retain the attractiveness of the Kuwaiti currency and reduce the cost of borrowing in Kuwaiti dinar, he elaborated. Al-Hashel expected that this will encourage demand for loans by the productive economic sectors and improve environment for investment which will stimulates aggregate demand and supports the growth of GDP for non-oil sectors.
He underlined that the CBK decisions draw on the data of the general economic performance, the indicators of local liquidity, the movements of savings and bank credits, and the interest on Kuwaiti dinar and the world’s major currencies, notably the US dollar. “These data serve as parameters for determining the upward or downward movement of the local interest rates,” Dr. Al-Hashel explained. He reiterated the commitment of the CBK to watching the developments in global economic, monetary and banking sectors continuously with a view to adapting the local monetary policy to them and maintaining the atmospheres conducive to economic growth.
Earlier, the Federal Reserve Board brought down the targeted range of its key interest rate by 0.25 basis point to 1.5 percent from 1.75 percent.