KUWAIT, (Reuters) – Kuwait’s central bank sees its key interest rates as appropriate as they are in line with economic developments, its governor Sheikh Salem Abdul-Aziz al-Sabah was quoted as saying on Sunday.

“The current discount rate is considered reasonable given the economic, monetary and banking conditions at this particular stage,” Sheikh Salem told Arabic daily al-Jarida.

The central bank last cut its discount rate by 50 basis points to 2.5 percent in February 2010 to help OPEC member’s economy recover from a sharp contraction in the previous year, which it had estimated at 4.6 percent.

The oil-reliant Gulf Arab country dropped its peg to the dollar in 2007 in favour of a basket of currencies dominated by the greenback, to stem then high inflation.

The world’s fourth largest oil exporter, which plans to form a currency union with Saudi Arabia, Qatar and Bahrain, is forecast to see economic growth of 4.0 percent this year after an estimated 3.0 percent rise in 2010 helped by robust crude prices.

Sheikh Salem also said the central bank will consider lifting guarantees of deposits at local banks “once the circumstances that led to it are over.”

In 2008, Kuwaiti lender Gulf Bank was rescued by the central bank after derivatives losses. Its troubles prompted the government to guarantee all deposits in local banks to restore confidence.