Qatar inflation rockets to 16.5%

Qatar's central banker says rising inflation will require 'extra efforts' for Gulf monetary union to succeed
Qatar inflation rockets to 16.5%
By Dylan Bowman and Reuters
Tue 16 Sep 2008 02:12 PM

Annual inflation in Qatar rose to 16.59 percent in the second quarter from 14.75 percent in the first quarter, official data showed on Tuesday.

The consumer price index of the world's biggest exporter of liquefied natural gas hit 172.39 points at the end of June compared with 147.86 points a year earlier, the Qatar Statistics Authority said in a statement.

Speaking on the sidelines of a central bank meeting in Jeddah, Qatar’s central bank governor said rising inflation will require "extra efforts" for the Gulf Arab monetary union to succeed.

"The rising inflation will require extra efforts in order to stabilise our economies and provide the appropriate environment in order for monetary union to succeed," Sheikh Abdullah bin Saud Al-Thani said. He did not elaborate.

Soaring inflation has heaped pressure on Gulf central bankers to ditch their countries’ peg to the US dollar.

The peg forces Gulf states to follow US monetary policy at a time when the Federal Reserve is slashing rates to stave off recession while the region is witnessing record growth on the back of high oil prices.

Sheikh Abdullah said Gulf central banks are better off now for having resisted pressures to drop currency pegs or revalue as the dollar hit its nadir earlier this year.

"We meet today in better conditions than in the previous meeting in Doha for we have succeeded in resisting calls to reform our currencies' peg to the dollar... or changing the exchange rate from the level where it was fixed," he said.

Economists at the Dubai International Financial Centre (DIFC) on Monday called for the planned Gulf Central Bank to peg a regional single currency against a basket of major currencies to help it target inflation and boost confidence in regional investments.

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