KUWAIT/BLOOMBERG
The Central Bank of Kuwait (CBK) has reduced its benchmark interest rate for the first time this year, joining US Federal Reserve-led monetary easing trend as regional central banks follow the Fed’s interest-rate cut by a quarter percentage point.
CBK stated that in light of the central bank’s mandate to maintain monetary and financial stability, the Board of Directors decided to lower the discount rate from three per cent to 2.75 per cent.
The Kuwaiti central bank said that the decision fulfils the dual objectives of promoting non-inflationary economic growth conditions in non-oil sectors as well as ensuring the continued attractiveness and competitiveness of the national currency as a reliable store of domestic savings.
Similarly, the Saudi Arabian Monetary Authority said that it has also reduced the repo rate by 25 basis points from 2.50 to 2.25 per cent and the reverse repo rate by 25 basis points from two to 1.75 per cent, adding that the adjustments are in line with its objective of maintaining monetary stability.
Policymakers in Kuwait lowered borrowing costs for the first time since 2012, after splitting from their neighbours when US rates were cut in July and September 2019. Central banks in the region usually tend to follow the Fed to protect their currencies’ peg to the dollar. Kuwait controls the value of its dinar against an undisclosed basket of currencies, meaning it has more flexibility in setting rates.
The Central Bank of the UAE also said it was cutting interest rates applied on the issuance of certificates of deposits by 25 basis points and reduced the repo rate for borrowing short-term liquidity had been cut by 25 basis points.
Additionally, the Central Bank of Bahrain which ignored the Fed’s rate cut in September 2019, cut all its key rates by 25 basis points. The central bank said that it reduced its one-week deposit facility to 2.25 per cent, its overnight deposit rate to two per cent as well as its one-month deposit rate to 2.6 per cent and its lending rate to four per cent from 4.25.
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