Inflation in the Middle East—Looking at the Right Numbers


By Masood Ahmed

Across the world, surging international food prices have become a major cause for concern and topic of debate. This is especially so in the Arab world, which is home to some of the largest food importers and where rising food prices have been one of the factors in recent political unrest.

In the context of ongoing political developments, governments across the region are responding to the rise in commodity prices with hikes in fuel and food subsidies, civil service wage and pension increases, additional cash transfers, tax reductions, and other spending increases. These measures will help poor households maintain their purchasing power and limit further increases in domestic food prices.

How should central banks—whose task is to prevent general price increases that would further cut into peoples’ incomes—react? What inflation metric should they target? Continue reading

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