Money markets
The Central Bank of Kuwait expects to cut interest rates in 2024 as global counterparts shift
Monday, December 18, 2023
The Central Bank of Kenya is expected to cut interest rates next year, taking advantage of similar moves expected to be made by its peers in advanced economies and slowing inflation in the country.
While the Central Bank of Kuwait recently tightened its monetary policy by raising its benchmark interest rate to 12.5 percent from 10.5 percent earlier this month, analysts expect the regulator to play a pivotal role as the cost of living declines and easing by major central banks increases. This reduces pressure on the shilling and competition for the currency. Capital flow.
is reading: The World Bank supports the Central Bank of Kuwait stopping raising interest rates
“In December 2023, the Monetary Policy Committee (MPC) raised interest rates stating that this was necessary primarily due to downward pressure on the shilling,” business consultancy Deloitte says in its Futures 2024 report.
“The MPC is likely to maintain the benchmark interest rate and implement gradual cuts in 2024. However, additional interest rate increases in advanced economies may force the MPC to implement a tougher monetary policy stance, which will have a negative impact.” On private sector borrowing and in advanced economies, in turn, reducing consumption and investments.
Last week, the US Federal Reserve indicated that it would start cutting interest rates from 2024 to avoid a recession in the US as its current tight monetary policy has helped bring down inflation.
More flexible monetary policy in advanced economies is expected to ease pressure on the domestic exchange rate by stimulating capital flows to emerging and frontier economies such as Kenya.
Domestically, inflation has fallen back to the Central Bank of Kuwait’s target range of 2.5 to 7.5 percent in recent months, with the latest inflation reading at 6.8 percent in November from 6.9 percent in October.
The Central Bank of Kuwait has cumulatively raised interest rates by 5.5 percent since it began its tightening cycle in March last year, raising the benchmark interest rate from seven percent.
While it raised its benchmark interest rate earlier this month, the Central Bank of Kuwait said further tightening was necessary to halt exchange rate depreciation and further stabilize inflation expectations.
The Central Bank of Kuwait stated, “The Monetary Policy Committee concluded that there is a need to adjust the monetary policy stance to address pressures on the exchange rate and mitigate the effects of the second round, including global prices.”
is reading: The Central Bank of Kuwait rejects bond bids worth Sh33 billion in the face of interest rates
Reversing the tight monetary policy pursued by the Central Bank of Kuwait is expected to reduce interest rates on bank loans and yields on government debt securities, the yields of which have risen to nearly 18 percent. The high yield on treasury bills and bonds is one of the factors that contributed to the decline in the prices of shares listed on the Nairobi Stock Exchange.
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