KUWAIT, 24 March 2005 — Kuwait’s central bank pushed up its key interest rate 25 basis points to 5.25 percent yesterday to keep the dinar currency competitive against the dollar following Tuesday’s US rate rise.
Central Bank of Kuwait Governor Salem Abdulaziz Al-Sabah told state news agency KUNA the discount rate, a local benchmark, was hiked from 5 percent effective yesterday. “The step will boost the national currency’s competitiveness,” Salem said, referring to Kuwait’s dinar currency which is linked to the dollar.
It was the seventh such rate hike since July 2004 when the central bank began a monetary tightening campaign, in step with the US Federal Reserve which hiked its key rate by a quarter percentage point to 2.75 percent on Tuesday.
“The continuing increases in interest rates on global currencies, especially the American dollar, necessitates that dinar interest rates keep going along with that trend,” Salem said.
This was especially true given the “pace of activity in the sectors of the national economy and its openness to the outside world as well as the linkage of the Kuwaiti dinar to the American dollar”, he added.
Kuwait’s biggest bank, National Bank of Kuwait, last month said in a report that the economy grew 20 percent in nominal terms last year, up from 16 percent in 2003, and had growth of about 5 percent in real terms.