KUWAIT, 3 July 2005 — The Central Bank of Kuwait said it is hiking the key dinar discount rate by a quarter of a percentage point to 5.50 percent effective today, the eighth hike since last summer in lockstep with the US Federal Reserve.
“The bank raised its discount rate by 25 basis points so it becomes 5.50 percent instead of 5.25 percent, as of Sunday, July 3, 2005,” Bank Governor Salem Abdulaziz Al-Sabah told state news agency KUNA in a statement.
The Kuwait dinar discount rate is the benchmark for local rates in the Gulf Arab state which controls nearly a tenth of global oil reserves.
It was the eighth hike in the dinar discount rate since July 2004 when the Kuwaiti central bank began a rate hike campaign in line with the US central bank.
The Fed on Thursday raised the federal funds rate a quarter-percentage point to 3.25 percent, a ninth straight increase in the key US interest rate.
The governor said the central bank is keen on securing consistency of the Kuwaiti dinar’s interest rate with that of major currencies, topped by the US dollar.
The bank chief said the successive rate hikes aim to safeguard the competitiveness of the national currency in the face of the rising interest rates on the other world currencies. “The central bank will not hesitate to move in the suitable direction to guarantee the continuing competitiveness of the interest rates on the Kuwaiti dinar with the rising trend for the interest rates on the foreign currencies, especially the US dollar,” he said.
“This will help create monetary stability in the local economy, safeguard the purchasing power of the national currency and worth to curtail any increase in the inflationary pressures in the local economy,” Salem added.
The tiny OPEC nation may post a record budget surplus of up to $18 billion in the fiscal year which ends in March 2006, some economists expect, thanks to soaring oil prices on world markets.
