The Central Bank of Kuwait cut its discount rate by 25 basis points to 4.00%, effective 19 September 2024, marking the institution's first rate reduction since 2020. The CBK announced the decision in a press release, stating that the move followed the conclusion of the global monetary tightening cycle that most central banks had initiated from March 2022 onwards in response to the surge in post-pandemic inflation.
The 25-basis-point increment chosen by the CBK is smaller than the 50-basis-point reductions adopted by several of its Gulf Cooperation Council neighbours on the same day.
KUWAIT'S CURRENCY BASKET PEG
The Kuwaiti dinar is pegged to an undisclosed basket of currencies rather than exclusively to the US dollar.
The CBK's statement acknowledged that the global tightening cycle begun in March 2022 had effectively run its course. At its peak, that cycle saw the Federal Reserve raise rates by 525 basis points from near zero.
The central bank emphasised in its communication that Kuwaiti monetary policy is managed with reference to both domestic and international economic developments.
GOVERNOR'S STATEMENT
Governor Basel Al-Haroon said the decision took account of domestic liquidity indicators, movements in deposits, bank credit and interest rates on the dinar and major currencies, and aimed to foster sustainable growth by stimulating aggregate demand; annual inflation had slowed from 4.71% in April 2022 to 3.00% in July 2024.
The cut brings the CBK's discount rate to 4.00%, its lowest level since July 2023. The CBK's press release did not specify a timeline for subsequent reviews or signal a preferred pace for further easing.
Bank news that matters, every weekday.
Follow The Global Banker on LinkedIn