Central Bank holds discount rate at 3.5% as US Federal Reserve raises interest rates by 25 basis points to 3.75%-4%

The Central Bank of Kuwait held its discount rate steady at 3.5%, choosing not to follow the Federal Reserve (the U.S. central bank) in raising interest rates by 25 basis points—the first increase in over three years—which lifted the target range for the federal funds rate to between 3.75% and 4%.

In a statement issued yesterday, the Kuwaiti central bank said that, as part of its continuous monitoring of key global economic and monetary variables, geopolitical developments, and their potential implications for the local economy, its current assessment of available domestic economic and financial data reflects the soundness and resilience of monetary and financial stability in Kuwait. It added that monetary trends remain consistent with the country’s domestic economic conditions.

The bank noted that the latest monetary and banking data indicate that the broad money supply (M2) increased by approximately 1.9% in July 2026 compared with the same month of the previous year. It also reported that resident deposits in local banks rose by about 9.8%, while credit facilities extended to residents increased by roughly 4.8% in July 2026 compared with the corresponding month in 2025. The statement reiterated that the current discount rate stands at 3.5%.

In concluding its statement, the Kuwaiti central bank affirmed its ongoing and vigilant monitoring of global and domestic economic and monetary developments, emphasizing its commitment to taking necessary measures through the deployment of available monetary policy tools and macroprudential instruments. It stated that this approach is gradual, balanced, and flexible, aimed at reinforcing monetary and financial stability in the State of Kuwait.

Turning to the U.S. Federal Reserve’s statement, the Federal Open Market Committee (FOMC) voted unanimously, 12 to 0, to raise the target range for the federal funds rate by a quarter percentage point to between 3.75% and 4%, in support of achieving the Fed’s dual mandate. The committee also continued its policy of maintaining ample reserves in the banking system.

The statement added that economic activity is expanding at a strong and steady pace, despite persistently elevated levels of uncertainty, partly attributable to geopolitical developments. Domestic spending has demonstrated resilience, productivity growth remains robust, and capital investment is solid. Job gains have maintained a pace consistent with labor force growth, while the unemployment rate has remained largely unchanged.

The statement noted that inflation remains elevated, and the monetary policy action taken is expected to support a return of inflation to the committee’s 2% target in the near term. The committee remains committed to achieving price stability.

In related developments, and in line with the U.S. Federal Reserve’s decision, several Gulf central banks raised their interest rates. The Central Bank of Qatar decided to increase its deposit, lending, and reverse repo rates by 25 basis points. The Saudi Central Bank raised its repo and reverse repo rates by 25 basis points, while the Central Bank of Oman increased the rate on reverse repo operations with local banks by 25 basis points.

The Central Bank of the United Arab Emirates decided to raise its overnight deposit facility rate by 25 basis points, from 3.65% to 3.9%, effective Thursday, September 17.

The Central Bank of Bahrain announced a 25 basis point increase in its overnight deposit rate, from 4.25% to 4.50%, effective immediately.

This decision is part of the measures taken by the bank to ensure monetary and financial stability in the Kingdom of Bahrain amid ongoing developments in international financial markets.