Insecure Gulf

The subtitle is The End of Certainty and the Transition to the Post-Oil Era. The author is Kristian Coates Ulrichsen, deputy director of the Kuwait Research Program on Development, Governance, and Globalization in the Gulf States, based at the London School of Economics and Political Science.

Ulrichson takes the present day oil-rich conditions, and imagines what they may mean sometime in the future when the oil resources are depleted and the world is making a transition to a non-oil based economy.

See what you think. You can get a Google preview of the book here.

New Club for Growth of the GCC

Pierre Razoux, senior research adviser at the NATO Defense College, has an op-ed in the New York Times.

The proposal to enlarge the Gulf Cooperation Council to Jordan and Morocco, made at a council summit meeting in Riyadh last month , marks a profound change in the nature of the organization as it reaches its 30th anniversary. This decision, which went practically unnoticed in the West, is all the more worthy of attention in that it is likely to usher in long-term changes in the region’s political scenario.

Initially set up to provide a safeguard against an Iranian military threat and to create regional economic integration in the Arabian peninsula, the Gulf Cooperation Council has moved away from its early agenda and now operates as a club for the Arab monarchies.

The council’s aim is simple: to defend by all means possible the region’s eight monarchic regimes. It fears that the fall of even a single monarchy could have irreversible consequences for all the rest, undermining the legitimacy of the reigning families and opening the gates to all those in the Arab world who are looking for more liberty, justice and equality. This is why the Gulf monarchies have intervened to quash the popular uprising in Bahrain.

A domino theory.

Maybe. I just don't see any of the rich monarchies falling. Even if they liberalized which I hope they will do.

I also don't see Jordanian or Moroccan troops taking up arms to quell unrest in any GCC country, though they might if there was an external attack. Remember during Saddam's invasion of Kuwait, Arab workers from poorer countries were expelled from GCC countries because they showed sympathy for Saddam.

I'm not ready to take the expansion of the GCC as likely just yet.

What's the Arab Spring costing the GCC?

Here's the bit most relevant to the UAE:

The revolutionary wave has largely spared the high-rent GCC monarchies with small national populations: Qatar, Kuwait and UAE. Pressures to throw around money have hence been less acute. The UAE government has nonetheless committed to spending $1.6 billion on infrastructure in the poorer and potentially restless northern emirates, raised military pensions by 70 percent and started subsidizing bread and rice.

...

In the wake of demonstrations and strikes in Bahrain and Oman, their richer GCC neighbors have recently promised 20 billion dollars to support development in the two countries -- a good share of which will have to be coughed up by Saudi Arabia. In the mid-term, relatively resource-poor Oman and Bahrain run the danger of becoming a fiscal ward of their better endowed neighbors. Bahrain's sovereign ratings have already been downgraded in March, while Oman is on review for potential downgrades.

Read the rest of The Cost of the Counter-Revolution in the GCC at Foreign Policy's Mideast Channel.

Oil and democracy

Click on image for larger version. Credit: Bloomberg

Bloomberg:

So does oil inhibit democracy? This is perhaps the central question of our discussion this week about the historical lessons the Arab Spring nations should pay attention to.

Michael L. Ross, a professor of political science at the University of California, Los Angeles, has been researching this issue for a decade. In a 2001 paper, and in updated research in 2009,Ross argues that oil wealth deeply impedes democratic transitions from authoritarian states.

He also found that the undemocratic effects of oil vary by region and have fluctuated between 1960 and 2002. The one causal mechanism for the "oil-autocracy link," Ross wrote in 2009, was the "rentier effect," in which oil states use low taxes and high spending to quell democratic pressures.

To reverse these undemocratic effects, oil states need revenue transparency and institutions accountable to the public -- as we discussed May 23.

What's with the Arab League?

What's with the on again - off again support by the Arab League for the UN's response to Gaddafi?

I asked two tweeters, and here are their replies:

@SultanAlQassemi What's going on with Arab League? #Libya
34 minutes ago
in reply to @uaeeconomist ↑

@SultanAlQassemi
Sultan Al Qassemi
@uaeeconomist it's now a tool in the hands of Amr Moussa
34 minutes ago via web
__________

@Tripolitanian What Arab countries are going to join coalition? Do you agree with Arab League's concerns? #Libya
38 minutes ago
in reply to @uaeeconomist ↑

@Tripolitanian
Libyan
@uaeeconomist UAE&Qatar r in the coalition - Arab league's concerns were irresponsible, it's too early 2 tell if there were civ casualties
36 minutes ago via web
_________

This twitter thing is starting to make sense to me as a communications tool.

These answers help inform the read of this report in the Washington Post:

Arab League condemns broad bombing campaign in Libya

The Arab League secretary general, Amr Moussa, deplored the broad scope of the U.S.-European bombing campaign in Libya on Sunday and said he would call a new league meeting to reconsider Arab approval of the Western military intervention.

Moussa said the Arab League’s approval of a no-fly zone on March 12 was based on a desire to prevent Moammar Gaddafi’s air force from attacking civilians and was not designed to embrace the intense bombing and missile attacks—including on Tripoli, the capital, and on Libyan ground forces—that have filled Arab television screens for the last two days.

“What is happening in Libya differs from the aim of imposing a no-fly zone,” he said in a statement on the official Middle East News Agency. “And what we want is the protection of civilians and not the shelling of more civilians.”

Moussa’s declaration suggested some of the 22 Arab League members were taken aback by what they have seen and wanted to modify their approval lest they be perceived as accepting outright Western military intervention in Libya. Although the eccentric Gaddafi is widely looked down on in the Arab world, Middle Eastern leaders and their peoples traditionally have risen up in emotional protest at the first sign of Western intervention.

Paragraph of the day

Regarding the division between the US and Saudi Arabia over Bahrain:

The crackup was predicted by a top UAE sheik in a February meeting with two visiting former U.S. officials. According to notes made during the conversation, the UAE official said: “We and the Saudis will not accept a Shiite government in Bahrain. And if your president says to the Khalifas what he said to Mubarak [to leave office], it will cause a break in our relationship with the U.S.” The UAE official warned that Gulf nations were “looking East” — to China, India and Turkey — for alternative security assistance.

Read, in the Washington Post.

Hundreds of protesters in Bahrain injured by shotgun blasts and clubs

King announces statement of emergency: Other Gulf leaders have urged Bahrain’s king not to give ground, fearing that gains by

Bahrain’s Shiite Muslims could offer a window for Iran to expand its influence on the Arab side of the Gulf. There are also worries that political concessions could embolden more protests against their own regimes, which have already confronted pro-reform cries in Oman, Kuwait and Saudi Arabia.

Gulf states send force to Bahrain following protests

I said recently the Saudi-Bahrain causeway was built with this in mind, but I didn't expect to be right so soon. This, to me, is very surprising. Would it happen if it wasn't royalty putting up a common front?

The BBC:

Troops from a number of Gulf states, including Saudi Arabia, have arrived in Bahrain in response to a request from the small Gulf kingdom, officials say.
...
A Saudi official said about 1,000 Saudi Arabian troops arrived in Bahrain early on Monday.

The troops are part of a Gulf Co-operation Council (GCC) deployment, a six-nation regional grouping which includes Bahrain, Saudi Arabia, Kuwait, Oman, Qatar, and the United Arab Emirates.

It is believed they are intended to guard key facilities such as oil and gas installations and financial institutions.

I wonder if the "guarding" is both literal and metaphorical. Market watchers are concerned about the possibility of protests in Saudi Arabia.

Business Intelligence - Middle East / Stratfor:

Troops from the United Arab Emirates are reportedly expected to arrive March 14. Al Arabiya reported that Saudi forces have already entered Bahrain, but these claims have yet to be officially confirmed by the Bahraini regime.
...
The ongoing tensions are exacerbated by the split between Bahrain’s Shiite movement, which became clearer during protests on March 11. The more hard-line faction of the Shiite movement, led by the Wafa and Haq blocs, has been increasing the unrest on the streets in the hopes of stalling the talks between the Shiite Al Wefaq-led coalition’s negotiations with the regime.
...
...If Bahrain indeed has requested Saudi intervention this time, the implication is that the Bahraini military is not confident in its ability to contain the unrest now.

Riyadh’s decision to send forces to Manama could be taken for this reason, since wider spread of Shiite unrest from Bahrain to Saudi Arabia would aggravate the already existing protests among Saudi Arabia’s own Shiite population. Saudi military intervention in Bahrain is also not unprecedented; Saudi Arabia sent troops to Bahrain in 1994 when Riyadh determined that Shiite unrest threatened the al-Khalifa regime.

The regional implications of the unrest in Bahrain were underscored when U.S. Defense Secretary Robert Gates visited Manama on March 12 and urged the Bahraini regime to implement bold reforms....

Dubai's Gulf News has a brief Reuters report on the troop deployment. Abu Dhabi's The National has picked up a more complete report from Agence France-Presse although the story is headlined Saudi troops 'enter Bahrain'.
The message seems to be, "don't try this at home".

Does this mean the GCC won't be able to help with a no-fly-zone over Libya?

Did Bahrain call in the GCC because it needed more firepower, or because needed foreign troops willing to fire because they aren't their own people? It's a scary thought, but I can't believe the GCC troops would use force unless their own lives are threatened.

Another thought -- I'm pretty that the bulk of the UAE armed forces are not Emiratis. That's partly because the work is not the kind Emiratis would accept, and partly because the rulers like it that way for a variety of reasons.

PorTgate cum PorKgate

This story in The Nation today is mostly about the plans for the richer GCC countries to put together a Marshall Plan for Oman and Bahrain to address what one official elliptically called "the circumstances that the region is experiencing".

But what really caught my line was this paragraph:

Meanwhile Sheikh Sabah al Ahmad Al Sabah, the Emir of Kuwait, has helped to mediate between the UAE and Oman to "clear the atmosphere" between the neighbouring countries following the arrest last month of what Oman alleged was an Emirati spy ring in the sultanate.

The story of the UAE spying on Oman is something I'd miss. Why would the UAE want to spy on Oman?

It turns out it's industrial espionage, otherwise known as market research.

You can do a Google and find plenty.

Muscati Confidential posted this back in November:

Well, Oman's Government, led by the Ministry of Finance, is investing heavily in a new industrial mega-port complex in Duqm, a previously sleepy coastal town in the middle of nowhere between Muscat and Salalah.
...
As part of that complex, the obvious play for Oman was to add a 'free trade port facility', where goods can be shipped in and out without significant duty or paperwork. The goods can be processed too, and 'value added'. It seems the Abu Dhabi crowd were concerned that the strategic location of the port* would impact the outlook for the UAE's planed free trade zone in Abu Dhabi, and indeed were concerned about the impact on the existing Jebal Ali Free Trade port in Dubai [note: now also effectively owned by Abu Dhabi, post Dubai-meltdown].

So it seems the foreign intelligence arm of the Abu Dhabi Royal family had managed to bribe several Omanis to betray their country and provide intel on the goings on in Duqm.

And how did Abu Dhabi respond? Muscati Confidential says:

The word is the UAE, as a demonstration of their petulance, have blockaded all pork shipments from the UAE to Oman. This is why there is a drastic shortage of nice American and other land imported pork product in Oman right now.

A monopoly for creating monopolies

Someone correct me if I wrong, but it is my understanding that the UAE has exclusive car dealerships (monopolies) and that these monopolies are protected by the monopoly power of the government. On top of that, many of these companies sell more than one brand. Consumers would be better off if there was competition.

In Qatar, the Peninsula newspaper reports that exclusive dealerships are likely to go:

Plans are afoot to open up protected dealership trade to foreign competition to ensure that the prices of durables (including, perhaps, automobiles) and other key imports come down to rational levels. Exclusive dealerships are so far a monopoly of Qatari companies and the law (Number 13 of 2000) regulating the trade forbids non-Qatari investment in
...
It is, however, not clear how the existing car or even other dealers could be affected by the amendments since they have inked long-term dealership contracts with overseas manufacturers and have been allotted ‘specified territories’ as their target markets.
...
Also, Qatar has its own set of standards and specifications for cars which are different from other GCC states. Considering that car dealers from neighbouring states are allowed to set foot here, they will have to import cars of different standards and specifications. This might frustrate the economy of their business.

Setting your own specifications is a classic way of deterring competition.

Does the move to greater competition have anything to do with heightened political pressure for reforms?

Chickens coming home to roost

In the gulf war provoked by Saddam's invasion of Kuwait there was a split between those Arab governments who supported Saddam, and the GCC countries that did not. At the time the GCC countries employed Jordanians and Egyptians and others some of whom demonstrated in support of Saddam. The result was that the GCC countries expelled these foreign nationals from the country, and replaced them with Asians. That policy has continued to this day.

It is much easier to manage foreign nationals who do not claim an Arab kinship. The Asian workers are not seen as the same kind of security threat.

The Wall Street Journal takes notes and makes the case that the policy of using Asian workers rather Arab workers is feeding discontent in the region:

AMMAN—Rasmy Mahmoud Khair supported his family in Jordan for nearly 15 years by working on a farm in Saudi Arabia. In the two decades since the farm job ended, he and two adult sons have tried in vain to reconnect the family to a Saudi paycheck.
...
The Gulf Cooperation Council, or GCC, countries—which include Kuwait, Saudi Arabia, Bahrain, Oman, Qatar and the United Arab Emirates—employ more than 15 million "guest workers," according to World Bank figures.

Arab manpower once comprised the bulk of this imported work force. Now, some 11 million of the GCC's guest workers hail from countries east of the Persian Gulf, mainly India and Pakistan. Some countries have contingents from China. The remaining four million migrants arrive from places like Jordan, Yemen, Sudan, Syria and Egypt.

Demonstrations that have gripped countries across the Middle East have been fueled, in part, by resentment over the lack of opportunity in countries across the region. But even as unemployment grows across the Arab world, jobs are increasingly going to Asian guest workers.
...
"The Arab employee is seen as someone who is demanding and as someone who poses a political risk," explains Muhammad Malallah, a management consultant in Amman. "The Indian employee does not. The Pakistani does not."
...
In 2003, Saudi Arabia announced its intention to reduce foreign residents—then some six million—to less than one-fifth of the total population. But instead of shrinking the foreign presence, the Saudis kept importing. Today more than eight million foreign workers reside in the kingdom, increasing the foreign presence to nearly a third of all residents.

Families like the Khairs have been shut out of the GCC boom. Rasmy Khair doesn't expect to work outside Jordan again.

GCC approves monetary union

Gulf News

Ironically, it was during the 2001 GCC Summit in Muscat that the plan for the common GCC currency was mooted and it was given the final nod here in Oman yesterday without the participation of the hosts.

It was decided to speed up the creation of the Monetary Board to oversee technical requirements for Monetary Union. The proposed board will finalise details for setting up the Central Bank and the issuance of the single currency.

Income tax?

The six Gulf nations have agreed in principle to implement corporate and individual income tax by 2012 and are now discussing ways to bring the deadline closer, people close to the matter told Emirates Business yesterday.

The oil- and gas-producing countries are grappling with the prospect of a significant contraction in energy income from oil and gas exports next year and the spectre of budgetary deficits.

People close to the action at the GCC summit in Muscat, Oman, that began yesterday said, however, that individual members of the Gulf group are unlikely to impose income tax unilaterally.

"However, the prospect of drastic reductions in oil revenues and the resultant fiscal deficits has forced the six countries to examine whether implementation can be done earlier than 2012," they said.

Recycling workers

UAE Minister of Labour Ali Abdulla Al Kaabi is defending the concept of a three-plus-three residency cap for unskilled foreign workers in the GCC.

ArabianBusiness.com reports

"The three-plus-three cap is only meant for unskilled workers. We want to make sure that we recycle labour, in and out. For example, we want to give as many people as possible a chance to come in and work in the country and not restrict it to the same workforce year-in, year out."
...
The workers would leave the UAE with experience which will benefit them in their home country as well, he added.

"In any case we're still in the process of fine-tuning the length of the cap and we also want to get a GCC-wide approval to enable workers to travel within the region."

Other benefits of the policy: Undercutting unskilled-worker activism; meeting world standards to extend rights to immigrants based on length-of-stay.

When can welfare benefits and immigration be separated?

Demographic imbalance continues to be a sensitive issue in the GCC:

"This region will not remain Arab-Islamic in the presence of millions of Asians here. I do not exaggerate when I say that we will soon see a Gulf minister or Member of Parliament from the Indian subcontinent," [Bahrain's Labour minister Majeed Al Alawi] said in an interview published on Sunday in Asharq Al Aswat newspaper.

Al Alawi lashed out at the lazy character of Gulf nationals that has made them almost fully dependent on imported labour even for the simplest tasks and blasted the Gulf business community for their uncontrollable greed, claiming that they were driven "only by financial interests and without any regard for the formidable damage caused by foreign workers."

The minister, a leading opposition figure who was given the labour portfolio in 2002, has now failed twice to have the GCC leaders endorse a proposal for a residency cap to limit the growing influence of the expatriate communities.

I would not describe Gulf nationals as having a "lazy character." I would say that they respond to incentives, and that in many countries in the Gulf nationals benefit from the welfare state that the oil revenues of those countries can support.

By contrast, the ex pats in the GCC have a reputation for working hard. But that is because their income is tied to their productivity; they do not receive the benefits of the welfare state. Arguably - because the GCC is so dependent on foreign labor - it has the most open immigration policy in the world. The economist Milton Friedman argued that open immigration was incompatible with a welfare state. Here's what Lant Pritchett had to say about that in an interview with Reason:

Reason: Milton Friedman has pointed out that open borders are incompatible with the welfare state.

Pritchett: I would have thought Milton Friedman would have taken that as an argument for open borders.

The free mobility of labor is incompatible with the welfare state if every person who is physically present in a location to perform an economic service automatically comes into the same set of welfare benefits as a local. That needn’t be the case.

This is what liberal democracies find hard. But it’s not impossible. You have to confront the injustice of the world and say this person is better off even without the welfare benefits, and this process is good for the world.

Reason: You then create a division between first- and second-class citizens. Isn’t that worrisome?

Pritchett: The world now is divided into first-class citizens of the world and fifth-class citizens of the world. The idea that we wouldn’t help a peasant trying to eke out a living on a side of a mountain in Nepal by letting him work in the United States, just because we have to, if he comes to the United States, endow him with all the rights of U.S. citizens—I think that moral calculus is backward.

So the first answer is: Milton Friedman is wrong. It’s not incompatible with a welfare state; it’s incompatible with a welfare state that doesn’t differentiate between people within its territory. Singapore manages to maintain an enormously high level of benefits for its citizens with massive mobility. Kuwait has one of the highest immigrant populations in the world, and you can’t ask for a more cradle-to-grave welfare state than what Kuwait gives its citizens. So it’s obviously possible to maintain whatever level of welfare state you want and have whatever level of labor mobility you want, as long as you’re willing to separate the issues.

In the GCC it has been politically feasible to admit immigrants and deny them welfare benefits. Would it be politically feasible in the U.S. to separate immigration from access to welfare benefits? Not all Americans would agree, but I suspect the majority believe that if someone is admitted to the country then they should have access to most if not all of the public benefits that citizens enjoy. At the same time Americans do not support open immigration. Thus, most Americans - although they may not recognize it - leave most would-be immigrants worse off than if they could accept second-class residency.

Thanks to freeexchange for the link.

Update - Arabian Business: "Al Aswat warned that the presence of foreign workers in the Gulf was a greater threat to the region than the fallout of a nuclear bomb or an Israeli attack."

UAE money changers throw out the dollar

There's the official rate and there's the market rate. The official rate has become untenable in the eyes of the market.

Gulf News says one of them is arbitrary

Arbitrary dirham rates offered by UAE money changers, in some cases as low as Dh3.05 per dollar or almost 17 per cent lower than the official rate, are sowing more confusion in the market where speculation on the dirham's revaluation is already rampant.

The UAE currency has been pegged at 3.6725 to the dollar since 1997 and until Sunday there was no change in the official peg.
...
Money changers, hotels and stores in shopping malls were accepting dollars at rates ranging from Dh3.05 to Dh3.50 per dollar yesterday.
...
"It is strange," said Ahmad Jan from Saudi Arabia as he walked between a bank branch and a money exchange at Deira City Centre and noted that the bank offered 60 fils more per dollar.

"What you see here is the official rate," a manager at the bank said.

Moroccan visitor Nasser Bin Omar said he accepted the lower dollar rate from the money dealer because he did not want to wait in the long queue at the bank.

Ah, yes, opportunity cost. The time cost of waiting. If the same thing is being sold at two different rates, where do the queues occur?

See, also, yesterday's story in the Gulf News,

UAE cautions markets against betting on dirham revaluation
The UAE warned markets against betting on a dirham revaluation as investors piled pressure on the region's dollar pegs, expecting Gulf states to change currency policy at a summit this week.
...
In remarks carried by the Al Khaleej newspaper, [Central Bank Governor Sultan Bin Nasser] Al Suwaidi moved to quell investor expectations that a change was imminent.
...
Bahrain's central bank threatened to take action against anyone betting on dinar appreciation and accused foreign banks of spreading revaluation rumours, the Middle East Economic Digest reported after an interview with Governor Rasheed Al Maraj.

See the world and buy it up, all the day you'll have good luck

Benjamin Franklin made famous the saying, "see a penny, pick it up, all the day you'll have good luck." He also said, "neither a borrower nor a lender be."

Whatever. Flush with cash, oil exporting countries are looking for some place to stick it. The New York Times reports:

“If you look at gulf countries, they have a total common economy that is about the size of the Netherlands,” said Edward L. Morse, chief energy economist of Lehman Brothers. “These are tiny countries, but they have to place collectively over $5 billion a week from their oil revenues. It’s not an easy thing to do.”
...
Though oil-producing countries have been looking at investments in the West since the 1970s, their strategies back then were largely confined to safe assets with a low return, like United States Treasury debt.

By 2001, with the collapse in oil prices, many of the oil exporters had depleted their dollar reserves, economists say.

But the boom in oil prices in the last five years has changed all that. It has persuaded oil producers to set up or expand “sovereign wealth funds” as vehicles to invest far more aggressively in the West, in their own economies and in emerging markets.
...
“The oil-producing countries simply cannot absorb the amount of wealth they are generating,” said J. Robinson West, chairman of PFC Energy. “We are seeing a transfer of wealth of historic dimensions. It is not just Qatar and Abu Dhabi. Investment funds are being set up in places like Kazakhstan and Equatorial Guinea.”
...
Recently Ben S. Bernanke, chairman of the Federal Reserve, has spoken of a “global savings glut” that has lowered interest rates worldwide. Ms. Farrell, of the McKinsey Institute, estimates that petrodollars may have kept American interest rates three-quarters of a percentage point lower than they would otherwise be, a direct benefit to American consumers.

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.

Kuwait abandons dollar peg

Reuters:

Kuwait unshackled its dinar from the tumbling U.S. dollar on Sunday and switched the exchange rate mechanism to a basket of currencies, throwing plans for currency union with other Gulf Arab oil producers into disarray.

Kuwait's central bank, which battled speculators for weeks to defend the peg, said the dollar's slide against other currencies had forced it to break ranks with fellow Gulf states to contain inflation from the rising cost of some imports.

The move stunned Gulf currency markets and volumes dried up. The impact would be clearer on Monday when international markets open, said Steve Brice, chief middle east economist at Standard Chartered Bank in Dubai.
...
"The massive decline in the dollar's exchange rate against main currencies ... has contributed to the increase in local inflation rates and this step is part of the central bank's efforts to curb inflationary pressure," Sheikh Salem Abdul-Aziz al-Sabah said in a statement carried by state news agency KUNA.

Kuwait was named as the top candidate for a revaluation in a Reuters poll of analysts in March and markets piled pressure on the dinar, betting the central bank would allow an appreciation as the dollar slid to record low against the euro in April.
...
"The basket would typically mean the euro, sterling, Swiss franc and the dollar," said Mazin al-Nahedh, head of the treasury department at National Bank of Kuwait. In the past the central bank did not disclose the composition of the basket, he said. Kuwait officials talked with nostalgia of the currency basket as the dollar slid on international markets, blaming the U.S. currency for rising inflation, which hit 5.15 percent at the end of the first quarter.

Not sure why "stunned" is an appropriate descriptor given that's the way the betting had been going. Still the the article is worth a "read it all."