Gulf a haven amid soaring inflation and interest rate hikes

Gulf a haven amid soaring inflation and interest rate hikes

The specter of inflation is once more looming over the global economy. The prospect of sharply rising prices of goods and services threatens to throw out the careful calculations of economic policymakers and make recovery from the pandemic recession more unpredictable and hazardous.

But inflation is not just an arcane matter for the theorists or the central bankers. The world seems to have a sinister folk memory of the dire effects of rising prices, dating back to at least the 1930s, with images of European workers taking home their salaries in wheelbarrows still haunting the collective mind.

Nobody thinks things will descend to such levels in the early 21st century. Economists understand the phenomenon of rising prices much better now and have an array of weapons — principally via interest rate policy — at their disposal to combat them. But the fear remains, more in some parts of the world than others.

In the US, the cost of living index is rising faster than at any time in the past four decades. Some big European economies are experiencing a similar rapid rise in prices.

In the Middle East, although rates have been rising less sharply, there will still be an appreciable effect on prices.