UAE central bank: no need to raise reserve requirements
The United Arab Emirates sees no need at the moment to follow Saudi Arabia and Qatar and raise the reserve requirement for banks to tackle inflation, central bank Governor Sultan Nasser al-Suweidi said on Thursday.
"We don't see any need at the present time to raise reserve requirements," Suweidi said in response to a question after a speech to a bankers' lunch.
Saudi Arabia raised the reserve requirement in November for the first time in 27 years, and Qatar followed suit this month.
Gulf countries are struggling to control surging inflation, without being able to raise interest rates -- because most peg their currencies to the dollar, they have been obliged to cut rates in line with the US Federal Reserve.
Raising the reserve requirement reduces the amount banks can lend, so it can curb inflation.
Asked whether low interbank interest rates and a surge in dirham liquidity would feed into higher inflation, Suweidi said: "We haven't seen any relationship, or very, very little relationship, between inflation and monetary expansion."
He said the United Arab Emirates was stepping up its monitoring of inflation.
"Inflation is the responsibility of the Ministry of Economy. The UAE is setting up a special statistics body to oversee inflation," he said.
A Reuters poll of economists this month forecast UAE inflation would be 10.1 per cent in 2007, up from 9.3 per cent in 2006. (Reuters)
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