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KUWAIT, Oct 30 (Reuters) - Kuwait, which saved one of its banks from collapse this week, lowered its benchmark discount rate by 25 basis points on Thursday, tracking a move by the U.S. Federal Reserve that other countries are also expected to emulate.
The latest cut, Kuwait's second this month after a whopping 125 basis point rate cut, put the discount rate at 4.25 percent. The central bank also reduced the repurchase rate to 2 percent from 2.5 percent.
The Fed lowered interest rates by 50 basis points on Wednesday, part of a barrage of central bank action deployed around the world to fight a deep economic slowdown. Japan and Europe are expected to follow suit as are the rest of the Gulf countries, which all peg their currencies to the U.S. dollar.
China, Taiwan and Hong Kong also cut rates to try to protect their economies from the fallout of the credit crisis.
Kuwait, the only Gulf Arab state without a dollar peg, passed laws guaranteeing all bank deposits on Wednesday after the central bank was forced to save Gulf Bank, the country's fifth-biggest bank, earlier this week after it suffered steep derivatives trading losses.
In addition to the rate cuts, Kuwait has launched a slew of other measures to support confidence and make credit more easily available.
The Kuwait Investment Authority, its sovereign fund, has pumped cash into the bourse, the Arab world's second largest after the Saudi Arabia exchange, to help stabilise markets. (Reporting by Ulf Laessing; writing by Amran Abocar; Editing by Jan Dahinten)