With an under-performing economy and a listless stock market, Kuwait’s central bank is coming under pressure to cut its discount rate, reported the Bahrain Tribune.
But the central bank governor, Shaikh Salem Abdulaziz Al Sabah, is being cautious. Although he has declared that the bank is prepared to act whenever necessary, he said that he would first study the effect expected from interest rate cuts abroad, particularly in the United States.
The most recent change in the Kuwaiti central bank’s rate was in May, when the discount rate was increased by half a percentage point to 7.25 percent on the Kuwaiti dinar.
Pressure on the Kuwaiti central bank to cut interest rates grew last week, following an announcement by the U.S. Federal Reserve Board chairman, Alan Greenspan, that his policy of raising interest rates was drawing to a close, because of the cooling of the U.S. economy and a concern that falling stock markets could lead to a drop in consumer and business spending.
The Kuwaiti interest in the trends of the U.S. market is not one of passing fancy. The Kuwaiti dinar is tied to a basket of currencies, which is dominated by the U.S. dollar.
Calls to preempt U.S. interest rate cuts were heard when a Kuwaiti ministerial committee discussed government plans to liberalize the economy, several of which include steps to boost activity at the Kuwait Stock Exchange (KSE).
Commenting on the plans, Abdel-Wahab Al Haroun, who heads the Kuwaiti parliament’s economic committee, said the government had suggested introducing a new weighted index for the KSE, options trading, a parallel market and encourage the formation of new investment funds. – (Albawaba-MEBG)