Kuwait holds discount rate at 3.5% as the Fed lifts US rates to 3.75% to 4%

The Central Bank of Kuwait left its discount rate at 3.5 per cent on 16 September, the day the US Federal Reserve raised its policy rate by a quarter of a percentage point, and said prevailing monetary conditions were consistent with the domestic economy, according to a statement from the bank.

The Federal Open Market Committee lifted the target range for the federal funds rate to 3.75 per cent to 4 per cent, in a decision approved by a 12-0 vote, the Fed said. The committee said inflation "remains elevated" and that the increase would support a timelier return to its 2 per cent goal. It described economic activity as expanding at a solid pace, with resilient domestic spending, strong productivity growth and robust capital investment.

What Kuwait said

The Kuwaiti central bank did not announce a rate change. Its statement said its assessment of local economic and financial data reflected "the soundness and strength of the monetary and financial stability" in the country, and that it would keep monitoring global and domestic developments and use monetary policy and macroprudential tools as needed, following "a gradual and balanced approach", according to the release.

The bank backed that view with credit and deposit data. Broad money supply (M2) grew 1.9 per cent in July 2026 from a year earlier. Residents' deposits with local banks rose 9.8 per cent and credit facilities to residents rose 4.8 per cent over the same period, the statement showed.

The decision widens the gap between Kuwait's discount rate and US policy rates. After the September move, the Fed's standing overnight repurchase facility rate and its primary credit rate both stand at 4.0 per cent, and the interest rate paid on reserve balances is 3.90 per cent, effective 17 September, according to the Fed's implementation note. The Fed also set its overnight reverse repurchase offering rate at 3.75 per cent, with a per-counterparty limit of $160 billion a day.

A synchronised tightening elsewhere

The US move was not isolated. The European Central Bank, the Federal Reserve and the Bank of Japan each raised policy rates by 25 basis points in September, and market pricing pointed to further increases from all three, according to a summary by Hungary's central bank in its own rate statement of 22 September. Hungary held its base rate at 5.50 per cent at that meeting.

On the published figures, Kuwait's 3.5 per cent discount rate now sits below the bottom of the US target range and half a percentage point below the Fed's 4.0 per cent primary credit rate. The Kuwaiti statement did not refer to the US decision or to the exchange rate, and it reported no pressure on deposits, which were growing at about twice the pace of lending in July, according to the release.

Ratings and the next decision point

Kuwait goes into the next round with stable sovereign ratings. Fitch Ratings affirmed the state at AA- with a stable outlook in August, according to a central bank release. Moody's affirmed it at A1 with a stable outlook in May, and S&P Global Ratings affirmed it at AA- with a stable outlook the same month, the bank said in separate releases (Moody's, S&P).

The next test comes at the end of October. The Federal Open Market Committee meets on 27 and 28 October, followed by a meeting on 8 and 9 December, according to the Fed's calendar. Kuwait published its September statement on the day of the Fed decision, and the October meeting will show whether the Central Bank of Kuwait continues to hold if US rates rise again.

The Kuwaiti central bank's statement made no forward commitment. It said it would ensure "the adoption of necessary measures" to reinforce monetary and financial stability, according to the release.