Gulf Arab states, such as the UAE, Saudi Arabia and Qatar, which peg their currencies to the dollar, are struggling to control surging inflation, fuelled by a five-fold increase in oil prices during the last six years and lower interest rates which are reduced in line with easing US monetary policy.
Inflation in the UAE hit a 19-year high of 9.3 per cent in 2006 and probably reached 10.9 per cent last year, the National Bank of Abu Dhabi said last month.
Lulu, which operates 37 supermarkets and hypermarkets across the UAE, will keep the prices of 32 basic goods throughout 2008, including rice, sugar, oil, flour, tea, butter, milk and poultry, the Ministry of Economy said in a statement on Sunday.
"The move aims to stabilise prices, alleviate inflation, maintain market balance and protect consumers," it said.
The UAE's Union Co-operative Society, which operates about 16 stores, said last month it had agreed to fix the retail price of 16 foods and raise them in line with increases in wholesale prices.
The latest agreements are likely to encourage other supermarket chains in the country of 4.5 million people to hold their prices steady too.
"We anticipate more private sector companies to join the campaign," Economy Minister Sultan bin Saeed Al Mansouri said in the statement.
Gulf Arab oil producers are trying to offset inflation by introducing price controls on rents, subsidising food and raising wages. (Reuters)
Lulu to freeze prices to curb inflation