The Central Bank of Kuwait (CBK) raised its benchmark discount rate by 25 basis points to 2.25 percent "to ensure competitiveness and attractiveness of the national currency as store of domestic savings, and to further strengthen the supporting environment for all the sectors of the national economy."
Mohammad Y. Al-Hashe, governor of the CBK, the central bank of the State of Kuwait, said in a statement from Dec. 16 that the rate rise would ensure higher returns for holders of the Kuwaiti Dinar (KD) "particularly in light of the announcement by the US Federal Reserve to raise the federal funds target rate, as a first step to revert to traditional monetary policies after a long period of time implementing exceptional policies known as 'Quantitative Easing,"
Since May 2007 the exchange rate of the dinar has been pegged to an undisclosed weighted basket of currencies of Kuwait's major trading partners.
The KD has been depreciating since mid-2014, in line with the fall in crude oil prices, and was trading at 0.30 to the U.S. dollar today, down 3.3 percent this year.
The governor also said that Kuwait is facing facing challenges from lower global oil prices that will have an adverse effect on growth, which underlines the importance of boosting the confidence and enhancing the attractiveness of the dinar.
The Central Bank of Kuwait issued the following statement: