Kuwaiti inflation hits record high

RECORD INFLATION: Kuwaiti inflation surged to a fresh record of 9.5% year-on-year in January. (Getty Images)

Kuwaiti inflation surged to a fresh record of 9.5% year-on-year in January, spurred by strong housing and food costs in the only Gulf Arab oil producer to have scrapped its currency peg to the ailing dollar.

Jumps of 16.1% in housing costs and 7.7% in food prices led the rise on the All Items Consumer Price Index of the world's seventh-largest oil exporter, government data obtained by Reuters showed on Thursday.

In May, Kuwait broke ranks with its Gulf neighbours which are preparing for monetary union by severing its link to the dollar, arguing that currency weakness was fuelling inflation by making some imports more expensive.

The dollar has tumbled to record lows versus the euro and a basket of major currencies this year.

Kuwait, in response, has allowed its dinar to rise almost 9% against the dollar, which comprises the largest weighting in its currency basket.

Dollar pegs have forced Gulf states to track US interest rate cuts to maintain the relative value of their currencies, even though their economies are booming due to a more than five-fold rise in oil prices in the last six years.

Inflation is accelerating across the world's biggest oil-exporting region, driven mainly by real estate costs, a weaker dollar and global commodity prices, particularly for food items.

In Saudi Arabia, inflation could exceed 10% this year for the first time since at least the 1970s, the kingdom's central bank governor said earlier this year.

Inflation in the largest Arab economy jumped to at least a 27-year high of 8.7% in February, almost double the level of six months earlier, as rents surged 18 percent and food prices jumped 13%. (Reuters)

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