CBK Cuts its Discount Rate by a Quarter Percentage Point from 2.75% to 2.50%
In light of the uncertainty of global economic growth prospects, and the negative impact of the coronavirus outbreak on global economic activity and international trade and decrease in total demand rates and domestic product. In addition to the Fed’s decision, on March 3, 2020, to cut the interest rate 0.5 percentage points in the face of risks posed by coronavirus to economic activities.
The Central Bank of Kuwait Board of Directors decided today, on March 4, 2020, to lower the discount rate 0.25 percentage points (from 2.75% to 2.50%).
In a statement, His Excellency the Governor, Dr. Mohammad Y. Al-Hashel announced that this discount rate cut is part of the precautionary measures taken to contain the impact of the coronavirus outbreak. The decision comes as part of the Central Bank of Kuwait’s efforts to maintain monetary and financial stability by fostering an atmosphere conducive to sustainable economic growth and ensuring the continued attractiveness and competitiveness of the national currency. As well as maintaining the stability of economic activity and macroeconomic performance.
Dr. Al-Hashel remarked, Kuwaiti banks are in a strong position and are able to withstand external shocks due to the strong financial buffers and solid financial position. He added, despite current pressures, the banks’ are able to continue to serve the national economy with great efficiency. This has been confirmed by recent financial stress testing conducted by CBK and the banks.
The banking sector’s strength has been bolstered by prudent regulatory policies implemented by CBK through micro and macro prudential instruments; namely, strengthening bank capital, building precautionary provisions and regulatory financial buffers. This has enabled the banks to enter a period of oil price fluctuations from a position of strength, as recently referenced in the IMF mission statement and international credit agency reports.
The Governor concluded his statement by adding; “CBK is closely monitoring the developments in the global economy and its impact on local markets and the banking sector, and will not hesitate to take the necessary decisions to ensure monetary and financial stability”.