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Abu Dhabi inflation climbs to 11.5pc

Abu Dhabi, June 14, 2008

Annual inflation in Abu Dhabi, the largest member of the UAE federation, jumped to 11.5 per cent in March, up from 10.7 per cent in December, driven by rent and food costs, according to an official report.

The first-quarter index for rents, electricity and water was up 18.21 percent from a year earlier while the index for food, beverage and tobacco gained 19.78 per cent, the emirate's Department of Planning and Economy said in a report issued on Saturday.

"There is a consensus that escalating rents is the main reason behind the rise of inflation," the report said. "The impact of rising rents have engulfed all vital sectors of production and consumption, thus causing the rise in prices of other goods and services."

Gulf Arab states, most of which peg their currencies to the dollar, are struggling to control inflation, fuelled by a more than six-fold increase in oil prices during the last six years.

Because of the peg, the UAE central bank usually shadows US interest rate moves, hampering the fight against inflation.

"Within the halted mechanisms of monetary policy, and the connection with the dollar-dirham peg, rents and fuel prices represent key factors in contingent solutions available for combating inflation," the report said.

"However, there are inflationary waves that materialize through cyclic successive increase in prices of fuel. Diesel went up by 52 percent during the past four months," it said.-Reuters




Tags: abu dhabi | inflation | rent | climb |

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