Friday, October 19, 2007

IMF appreciates the Dirham

Babu Das Augustine, Banking Editor for Gulf News writes
Despite assertions by GCC central banks in the past that the dollar's weakness has little to do with domestic inflation in the region, the IMF said yesterday that the weakening dollar has added to inflationary pressures in the GCC countries which have pegged their currencies to the dollar.
The IMF has called on the GCC governments to rationalise spending to the absorptive capacities of their respective economies to avoid any excessive demand-led overheating.
The World Economic Outlook report said that the GCC states are expected to move towards independent monetary policies to fight inflation that will eventually have an impact on the status of the pegged currencies and the exchange rates. "Inflationary pressures are expected to persist in GCC countries as domestic demand expands in response to the increasing wealth, and the exchange rates should appreciate in response to these developments," the WEO said.
My emphasis.

The October World Economic Outlook is available here.

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