Qatar inflation hovers below 14%

Inflation in Qatar rose slightly to 13.74% at the end of December, its second-fastest pace on record, as rents and food prices surged in the Gulf state that is adopting price controls to curb price rises.

Inflation across the Middle East, the world's top oil-exporting region, has been rising mainly because of surging demand for housing and office space as the economy has expanded, spurred by a near five-fold increase in oil prices since 2002.

Rents and utility costs, which comprise one category in the Qatar index, rose 27.7% in the fourth quarter, compared with 28.8% in the previous three months, according to data from the General Secretariat for Development Planning.

Food, beverage and tobacco costs in Qatar, which pegs its riyal currency to the dollar, climbed 10.5%, accelerating from 6.59% in the previous quarter, the data showed.

The general index was at 159.34 points at the end of December, compared with 140.09 points a year earlier - its second-fastest pace of growth on record, the data showed. Inflation in Qatar was 13.73% at the end of September.

Qatar could lower a cap on rent increases that landlords can charge by three percentage points to 7%, the local Peninsula newspaper reported last week.

The country enacted a new rent law on Friday to help protect tenants rights, the same paper reported on Saturday.

Inflation in Qatar, holder of the world's third-largest natural gas reserves, hit a record 14.81% at the end of March last year.

Like most other Gulf states, Qatar's dollar peg forces it to track US monetary policy at a time when the Federal Reserve is cutting interest rates to help the US economy ward off recession.

Qatar gets about 50% of its imports from the eurozone, according to Calyon Credit Agricole, raising import costs as the dollar slid to record lows versus the euro and a basket of major currencies in the fourth quarter.

The oil producer is considering introducing subsidies on some commodities, Al-Sharq newspaper quoted the prime minister as saying last week, without giving details.

Qatar is also looking at policy options to fight inflation, including possibly dropping its peg to the dollar, Ibrahim Al-Ibrahim, economic adviser to the Qatari ruler, told newswire Reuters last month.

Qatar's Finance Minister Youssef Hussein Kamal, also speaking to Reuters last month, said the government planned to sell bonds to soak up some liquidity, build cheaper homes and control building material prices to tackle rising prices.

Qatar's central bank, meanwhile, has increased banks' reserve requirement by 100 basis points to 3.75% in two moves since December, forcing banks to keep more money in their vaults to slow down money supply growth, an indicator of future inflation. (Reuters)

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