Press Releases

The CBK Board of Directors has decided to raise its discount rate by a quarter percentage point to 6.25% from 6%, effective from 3-7-2006, for the first time since the 2nd of November 2005. It is noted that during the period extending from that date to end of June 2006, the US Federal Reserve made five consecutive rises in its main policy interest rate, totaling 1.25 percentage points.

H.E. Sheikh Salem Abdulaziz Al-Sabah, Governor and Chairman of the Board of Directors of the Central Bank of Kuwait (CBK), explained in a press statement to the Kuwait News Agency (KUNA) that the decision to raise the discount rate was in line with the CBK's sustained efforts towards enhancing the competitiveness of the Kuwaiti dinner (KD) and further reinforcing its attractiveness as a store of domestic savings. H.E. the Governor clarified that the sustained upward trend in interest rates on international currencies, particularly the US dollar, puts particular significance to enhancing the competitiveness and attractiveness of the KD as a store of domestic savings, by providing an adequate margin in favor of interest rates on the KD, compared to the interest rates on the US dollar to which the exchange rate of the Kuwaiti dinar is pegged within specific margins. H.E. the Governor emphasized that a margin between the interest rates on the KD and US dollar represents a significant element of the CBK's monetary policy aimed at firming up the atmosphere of monetary stability in the national economy, and curbing capital outflows, considering the main characteristics of the Kuwaiti economy in terms of the freedom of capital movements and KD exchange rate system on the one hand, and the domestic economic, monetary, and banking developments on the other.

Within that context, H.E. the Governor of the Central Bank of Kuwait explained that increasing the domestic interest rates contributes to strengthening the atmosphere of monetary stability, by enhancing the attractiveness of the national currency as a store of domestic savings on the one hand, and curbing the witnessed acceleration in credit expansion on the other, thereby containing the inflationary pressures resulting from the sustained increase in domestic demand.

H.E. the Governor concluded his statement by emphasizing CBK's keenness on using the monetary policy instruments at its disposal, in a preventive and gradual way, in order to further firm up the atmosphere contributing to the enhancement of monetary stability in the national economy.