Bahraini Spirit
November 10th, 2005, 02:45 AM
Price pressure in Qatar will peak soon and the central bank is aiming for inflation of two per cent in two years, the bank's governor said.
The bank has been under pressure to tackle inflation after Qatar's ruler described rising costs as the only "negative indicator" in the Gulf state's booming economy, expected to grow 20pc this year.
Abdullah bin Khaled Al Attiyah said in an interview that inflation was a concern and that it would end 2005 around 6pc.
"I think we are close to the peak in the inflation cycle," Al Attiyah said in an interview on the sidelines of an Islamic finance conference in Luxembourg.
"Inflation is six pc. I think by the end of the year, it will be close to that," he added. "I think two pc (inflation) is acceptable, I think it should happen in two years' time."
Qatar raised its benchmark deposit rate by 15 basis points on Tuesday and officials said the move was partly aimed at calming inflationary pressures. A hike was widely expected after the US Federal Reserve's quarter point rise last week because the Qatari riyal is pegged to the US dollar.
According to central bank figures, inflation was 5.8pc in the second quarter of 2005 and 6.8pc last year.
Qatar, a tiny country with a population of less than one million and home to the world's third largest gas deposits, is investing heavily in infrastructure and has launched giant construction projects.
Al Attiyah said he expected inflation to ease when the infrastructure projects are completed. He has previously said he expected price pressure to ease after Qatar hosts the December 2006 Asian Games, which pushed up rent and property prices.
Qatar's stock market is also booming thanks to a surge in liquidity and has risen 90pc so far this year.
"It (the rise) is fed by too much speculation in the market," Al Attiyah said. "The market is becoming expensive but in general we have had high growth and profits. There is a justification for it, but in general it is expensive."
Foreign ownership is limited to 25pc of listed companies and Al Attiyah said Qatar intended to lift this level, but in stages.
Qatar is one of six states in the GCC that plan to unify their dollar-pegged currencies by 2010.
Al Attiyah said the plans were still on track even though finance ministers withheld approval last month of the convergence targets saying they needed time to agree details. "The target for the single currency is 2010 but as you may know, reaching this target involves a lot of decision making, dicussion on entry criteria and this sometimes needs to be re-evaluated from time to time," he said. "But the target is still 2010... We work under the political umbrella, the political will is there."
The bank has been under pressure to tackle inflation after Qatar's ruler described rising costs as the only "negative indicator" in the Gulf state's booming economy, expected to grow 20pc this year.
Abdullah bin Khaled Al Attiyah said in an interview that inflation was a concern and that it would end 2005 around 6pc.
"I think we are close to the peak in the inflation cycle," Al Attiyah said in an interview on the sidelines of an Islamic finance conference in Luxembourg.
"Inflation is six pc. I think by the end of the year, it will be close to that," he added. "I think two pc (inflation) is acceptable, I think it should happen in two years' time."
Qatar raised its benchmark deposit rate by 15 basis points on Tuesday and officials said the move was partly aimed at calming inflationary pressures. A hike was widely expected after the US Federal Reserve's quarter point rise last week because the Qatari riyal is pegged to the US dollar.
According to central bank figures, inflation was 5.8pc in the second quarter of 2005 and 6.8pc last year.
Qatar, a tiny country with a population of less than one million and home to the world's third largest gas deposits, is investing heavily in infrastructure and has launched giant construction projects.
Al Attiyah said he expected inflation to ease when the infrastructure projects are completed. He has previously said he expected price pressure to ease after Qatar hosts the December 2006 Asian Games, which pushed up rent and property prices.
Qatar's stock market is also booming thanks to a surge in liquidity and has risen 90pc so far this year.
"It (the rise) is fed by too much speculation in the market," Al Attiyah said. "The market is becoming expensive but in general we have had high growth and profits. There is a justification for it, but in general it is expensive."
Foreign ownership is limited to 25pc of listed companies and Al Attiyah said Qatar intended to lift this level, but in stages.
Qatar is one of six states in the GCC that plan to unify their dollar-pegged currencies by 2010.
Al Attiyah said the plans were still on track even though finance ministers withheld approval last month of the convergence targets saying they needed time to agree details. "The target for the single currency is 2010 but as you may know, reaching this target involves a lot of decision making, dicussion on entry criteria and this sometimes needs to be re-evaluated from time to time," he said. "But the target is still 2010... We work under the political umbrella, the political will is there."