The Central Bank will continue to make adjustments to varying degrees in the monetary market intervention rates that are currently applied to all periods of the interest rate structure, including repurchase operations (repo), the CBK bonds and securitization, the system for accepting time deposits, direct intervention tools, in addition to other public debt tools.

A local Arabic daily said this happens at a time when the banking community is awaiting the preparations of the central banks in the region and the world to deal with what will come out of the US Federal Reserve meeting today (Wednesday).

Despite prior knowledge of the decision to raise, which will be at a level between 75 and 100 basis points, according to opinion polls, as well as statements and references by many members of the Federal Reserve, the daily has learned that the Central Bank of Kuwait will take a different approach in its monetary policy, as it tends to raise the discount rate by only a quarter of a percentage point from 2.75% to 3%, starting from September 22, 2022, provided that it continues to monitor the movement of deposits in banks on a weekly basis to determine any effects resulting from monetary developments, locally, regionally and globally.

According to sources in the banking sector, the monetary policy led by the Central Bank of Kuwait is determined to gradually raise the discount rate that it started since April at a quarter-point level, and by using monetary intervention tools when needed, to allow absorbing any effects of the decision to raise at a rate lower than the Fed while the economists stressed that the policy of raising the discount rate pursued by the Central Bank of Kuwait has proven its success in reducing the impact on the local economy and its units from a significant increase in the discount rate.

It has been able to this day to deal with a discount rate that reached 2.75% instead of 4% if it followed the same raising rates that were carried out by the Federal Reserve. Most of the countries in the region followed suit, which formed a pillar and pillar of the Kuwaiti economy, which has suffered from deflation and decline over the past years in an effort to maintain continued growth in light of controlled inflation rates that are much lower than their counterparts recorded in major economies.

The Central Bank of Kuwait’s strategy in facing the pressures of tightening US monetary policy on the world is based on a gradual increase in discount rates, on the basis of avoiding aborting the strong growth experienced by the Kuwaiti economy since the last quarter of last year and continuing until now, especially in the non-oil productive sectors. In itself, this strategy ensures an effective protection of the Kuwaiti dinar as a remunerative container for savings by activating its tools in monetary policy that allow it to work to achieve the required balance and tight work to maintain the attractiveness of the dinar.

To maintain the required balance in light of the large and exceptional interest rate hikes, both in the United States of America and now in the European Union, the Central Bank of Kuwait will follow in the coming period a mechanism for a gradual increase in the discount rate based on careful monitoring of banking and economic data, taking into account monetary decisions and indicators during the last period.

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