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Saudi inflation accelerates to record in Dec

NEW YORK — Saudi Arabian inflation accelerated to a record 6.5 per cent in December, increasing pressure on the largest Arab economy to revalue its currency.

The inflation rate rose from 6 per cent in November, the Ministry of Economy and Planning said in a statement on its Web site yesterday. Inflation averaged 4.1 per cent in 2007, up from 2.2 per cent in 2006, the ministry said.

Gulf states, including Saudi Arabia and the United Arab Emirates, are under pressure to revalue their currencies against the falling dollar to arrest rising inflation, which has accelerated to records in all six Gulf Arab states in the last 12 months. The Saudi Ministry of Economy did not provide a breakdown of components for the cost of living index.

"I think the Saudi government will hold firm, and not revalue the riyal against the dollar,'' said John Sfakianakis, chief economist at Saudi British Bank, in a telephone interview from Jeddah yesterday. "The causes of inflation in Saudi Arabia are food and rents. We expect the build-up in inflation will continue for the first half of 2008.''

Oman's inflation accelerated to a record 7.6 per cent in November on food and rent, the Economy Ministry said yesterday. Inflation in Qatar rose to 13.7 per cent in the third quarter, the highest in the Gulf.

Middle East central banks with fixed exchange rates to the dollar may opt for a 'coordinated'' revaluation to curb inflation should the US currency weaken further, Standard Chartered Plc said in a research note yesterday.