Kuwait follows US fed interest rate hike

The Central Bank of Kuwait said Wednesday it has decided to raise its benchmark discount rate by 25 basis points to 2.50 percent after the US Fed hiked its rate.

Governor Mohammad al-Hashel said in a statement the increase was taken “to ensure the continued competitiveness and attractiveness of the national currency,” after taking into consideration interest rates movements on major currencies. The hike will be effective from Thursday, the statement said.

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The US Federal Reserve on Wednesday raised the benchmark interest rate by a quarter percentage point citing an improving economy. The Kuwaiti decision was taken despite the sharp decline in the price of oil which contributes to over 80 percent of public revenues.

Kuwait is the only member of the six-nation Gulf Cooperation Council (GCC) state not to peg its dinar to the US dollar. Instead the dinar is linked to a basket of major currencies. Under Central Bank regulations, interest rates on consumer loans cannot exceed three percentage points above the discount rate.