business-data | Edakulathur Michael Johnson

Economists warn central bank against rising inflation Gulf News Report Dubai: Economists yesterday warned the UAE Central Bank of a further escalation of inflation if interest rates are not adjusted immediately. The International Monetary Fund (IMF) has singled out inflation as the number one challenge facing the UAE's growing economy. In a recent report it had cautioned the authorities to tighten fiscal policy or face the consequences. Interest rates in the UAE should be raised to seven or eight per cent from 5.25 per cent now to curb surging inflation and slow a bounding economy, a Standard Chartered bank economist said yesterday. "Inflation is one of the major challenges faced by the UAE's economy, which we feel is operating above its capacity,? Mohammad Al Haj, chief of UAE mission at the IMF, told Gulf News following the release of its annual report on the UAE economy. "The government should tighten fiscal policy to contain inflation which was 8 per cent last year, although it could be higher. This is already high compared to other GCC countries.? Steve Brice, head of research for the Middle East and South Asia for the bank, told Gulf News real interest rates in the UAE were negative after considering the official inflation estimate of six per cent. "There was a need to raise rates to curb demand in the fast-growing economy even though rising house rents were a significant contributor to inflation, on which an interest rate hike would have no impact,? Brice said.