Annual inflation in Oman accelerated to a 16-year high of 7.09 percent in September as food prices soared 14 percent in the Gulf Arab state that pegs its rial currency to the dollar.
Oman, like its oil-producing neighbours, has been struggling to contain inflation at decade-high levels because its central bank traditionally tracks U.S. interest rate policy to maintain the relative value of its currency.
Saudi Arabia’s inflation rate hit its highest in at least a decade in September on higher rents and food prices, raising pressure on the world’s biggest oil exporter to heed growing discontent over prices.
In Oman, food, beverage and tobacco prices, which account for almost a third of the index, rose 14% year-on-year in September, while rents climbed 7.9 percent, data on the Ministry of National Economy website showed.
“That’s a huge jump in food prices and I don’t see it coming down much with continued dollar weakness,” said Monica Malik, senior economist in Dubai for Egyptian investment bank EFG-Hermes.
Oman’s consumer price index rose to 113.3 points on Sept. 30, compared with 105.8 points a year earlier, the data showed. Inflation in August was 6.47%.
Only 5.2% of Oman’s imports in 2006 were from the United States, while 17.3% were from Japan, 5.1% from Germany, 5.3% from India and 3.4% from Britain, according to the 2006 Oman central bank annual report.
The Omani rial hit a month high of 0.38390 per dollar on Monday as investors piled into Gulf Arab currencies on the first global trading day since a source familiar with Saudi currency policy told Reuters the country could consider revaluing its riyal.
The Saudi riyal hit a new 21-year high and investors bet the riyal could rise more than 2% in a year.
Oman, which sets monetary policy at a weekly auction of certificates of deposit, cut the yield on its one-month certificates by more than 90 basis points since September 19, the day after the U.S. Federal Reserve slashed 50 basis points off its benchmark rate.
The Fed funds rate was cut by another 25 basis points last month, a key factor driving the dollar to life-time lows against the euro and a basket of six major currencies this month.
Oman considered measures including unshackling the rial from the dollar and price caps to contain inflation but decided against such moves, the commerce minister said in October. (Reuters)
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