Kuwait raises key interest rate after US Fed decision

The Central Bank of Kuwait said Wednesday it has decided to raise its benchmark discount rate by 25 basis points to 2.25 percent after the US Fed hiked its rate.

Governor Mohammad al-Hashel said the increase is to ensure the "competitiveness of the national currency", and support the national economy, the official KUNA news agency reported.

It will be effective from Thursday.

The decision was taken despite the sharp decline in the price of oil which contributes to over 90 percent of public revenues.

Kuwait is the only member of the six-nation Gulf Cooperation Council (GCC) state not to peg its dinar to the US dollar.

Instead the dinar is linked to a basket of major currencies the composition of which is kept confidential, but it is believed that the greenback accounts for more than 70 percent of its weight.

Kuwait's rate hike also comes at a time of sluggish economic growth forecast for 2015 following a 1.6 percent contraction in GDP last year.

Under central bank regulations, interest rates on loans cannot exceed three percentage points above the discount rate.