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Tue 10 Nov 2009 01:38 PM

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Oman annual inflation falls to 1.25% in Sept

Omani consumer price index stood at 130.1 points in Sept after a brief uptick in Aug.

Oman's annual inflation fell to 1.25 percent in September, after a brief uptick in August, resuming a year-long downward trend, data from the Ministry of National Economy showed on Tuesday.

Inflation in Gulf Arab states has dropped sharply from last year's record highs after the global financial crisis and weaker oil prices halted a boom in the world's largest oil producing region.

The Omani consumer price index (CPI) stood at 130.1 points in September, data showed. The annual inflation rate was 1.89 percent in August.

"The weak dollar is jacking up landed cost of imported food materials from Europe. However, moderation in rent and other services is holding the CPI from going sharply up," said Joice Mathews, senior researcher at United Securities.

The annual inflation rate in Oman, which pegs its currency to the U.S. dollar, peaked at almost 14 percent last year but has steadily retreated as oil prices fell from record peaks in July 2008.

The dollar held close to 15-month lows against a currency basket on Tuesday.

Oman's food, beverage and tobacco index, which has the largest weight in the overall CPI index, rose to 152.6 points in September from 151.6 points in the previous month.

The rent component edged up to 141.2 points in September from 140.5 points, government data showed. The base year for the index is 2000.

Mathews expects the inflation rate to stabilise around current levels in the coming months, taking a direction depending on the dollar's performance.

"However, the rising demand for goods and services in the country is holding me back from anticipating a scenario of sustained deflation in Oman," he said.

The International Monetary Fund expects the non-OPEC oil producer to register inflation of 3.3 percent this year and 3.0 percent in 2010, well below the 12.6 percent seen in 2008. (Reuters)

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