Thursday 22, March 2018 by Jessica Combes

Kuwait follows Fed, raises key rate for first time in a year


Kuwait raised its key interest rate on Wednesday for the first time in a year, tracking a quarter point increase in US Federal Reserve benchmark rate, according to Bloomberg.

Kuwait’s central bank raised the discount rate to three per cent to keep the dinar competitive, according to an emailed statement Bloomberg reported. The UAE and Bahrain also put up their benchmark rates shortly after the widely anticipated Fed decision to lift the federal funds rate target range to 1.5 per cent to 1.75 per cent in a unanimous 8-0 vote.

Gulf Arab central banks that peg their currency to the dollar typically follow Fed decisions in lockstep, but Kuwait pegs its dinar to a basket of currencies and chose to sit out the previous two increases in US rates in 2017 in order to preserve growth and keep down borrowing costs.

The Kuwaiti central bank said in its statement it had broken that pattern on Wednesday in order maintain the competitiveness of its currency and keep local savings attractive.

The UAE raised its repo rate by 25 basis points to two per cent and increased its certificates of deposit rate by the same amount, while Bahrain raised its overnight deposit rate by 25 basis points to 1.75 per cent and its one-week deposit facility rate by a quarter point to two per cent.

Saudi Arabia did not announce a move after pre-emptively increasing its benchmark repo rate last week for the first time since 2009.


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