M3, the broadest measure of money circulating in the economy, hit 17.99 billion dinars ($63.85bn) at the end of July, up 22.5 per cent from a year earlier, according to central bank data published yesterday.
Money supply grew 17.7pc year-on-year in June.
"This is another challenge for the central bank in the battle to control inflation," said Koceilas Maames, Africa and Middle East Economist at Calyon Credit Agricole in Paris.
Annual inflation in the Middle East's fourth largest oil exporter topped 5pc for the third month running in May, the latest available figure.
Inflation is accelerating across the Gulf region as governments invest more of their windfall oil revenue in tourism projects and infrastructure.
Kuwait's central bank blamed rising inflation on the dinar's peg to the dollar, saying the US currency's slide to record lows against the euro this year was raising import costs. Kuwait pays for about a third of its imports in the European currency.
"This continued expansion in liquidity does not bode well for inflation which is already way above the central bank's comfort level," said Caroline Grady, economist at Deutsche Bank in London.
"More bad news on inflation could mean another step appreciation of the currency, and we see a bias for appreciation beyond our 0.28073 end-year forecast," she said.
l Kuwait's central bank left the dinar reference rate against the dollar unchanged for a second day on yesterday after allowing its first depreciation in two weeks. The dinar will trade around a mid point of 0.28160 per dollar, the central bank said. On Tuesday it allowed a depreciation of 0.04 per cent, the first since August 15.
Via: Gulf Daily News
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