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Thu 24 Feb 2011 11:18 AM

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Bahrain CPI lowest since at least 2007

Consumer price growth slowed to 0.9% year-on-year in Jan from 1.0% in the previous month

Bahrain CPI lowest since at least 2007
BAHRAIN INFLATION: Bahrains annual inflation eased in January to its lowest level since at least 2007 and prices edged up from the previous month (ITP Images)

Bahrain's annual inflation eased

in January to its lowest level since at least 2007 and prices

edged up from the previous month helped by higher transport

costs, the Gulf Arab country's data showed on Thursday.

Inflation in the small non-OPEC oil producer, which has seen

a wave of public unrest, has been holding in low single digits

over the past year as its key financial sector is slowly picking

up from the financial crisis and a regional property crash.

Consumer price growth slowed to 0.9 percent year-on-year in

January from 1.0 percent in the previous month, data from the

Central Informatics Organisation showed.

On a monthly basis, living costs in the island kingdom rose

0.3 percent after a 0.2 increase in December.

"The figures for Bahrain are quite low. Even during the boom

years, inflation never really took off in Bahrain the way it did

in other countries in the Gulf," said Daniel Kaye, senior

economist at National Bank of Kuwait.

"At these very low levels, there is a chance that Bahrain

could dip into deflation. One deciding factor will be the impact

of food prices this year and what it will do to the CPI," he

said.

Food costs dropped sharply on a monthly basis, falling by 2

percent in January, while transport prices jumped 1.4 percent.

Housing costs remained unchanged.

Analysts said the week-long political turmoil was unlikely

to impact inflation in the country, which imports most of its

food needs and pegs its dinar currency to the U.S. dollar, like

most Gulf Arab oil producers.

"Bahrain imports most of its consumer goods and food. The

exchange rate in Bahrain is fixed to the dollar, therefore I

don't think the unrest will impact directly on inflation," said

Gabriel Sterne, senior economist at London-based Exotix.

Bahraini protesters camped out in Manama's Pearl Square

pressed demands for a new government on Monday, backed by a

teachers' strike that closed many schools.

Analysts polled by Reuters expected inflation to reach 3

percent this year, after 2.0 percent in 2010.

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