Opinion | Editorials
Making a bad situation worse
The road downhill with the dollar is now accelerated by the cut in interest rates.
- Gulf News
- Published: 00:38 March 20, 2008
By swiftly cutting its key interest rate in line with the US Federal Reserve, the UAE Central Bank has signalled its continuing devotion to the existing US dollar peg.
Such prompt action limits the scope for doubt about that commitment, but it cannot really remove the doubt about its economic logic.
Inflation in the UAE may be the natural price of rapid economic growth, but the tied relationship with the US economy, which is under huge strain, creates an equally natural sense of danger.
We've been on this road downhill with the dollar for years. Now the global credit crisis and incipient recession in the US make the situation acute.
Ordinary citizens in the UAE will undoubtedly note that interest rates on dirham savings are next to nothing, while inflation is ripping into the real value of cash. How to save, how to invest, how to protect earnings and wealth? That's not an easy call.
For the economy, real interest rates are venturing further into negative territory, exactly the opposite of the real need.
Related Links
It is no wonder if speculation of change on the dollar peg grows, nor if government action were taken. The circumstances now justify both.
More from Editorials
More from Opinions
Opinion Editor's choice
-
Egyptians must reject foreign meddling
By Tariq Ramadan, Special to Gulf News
Presidential election may turn out to be less a new chapter in a democratic future than an old chapter complete with a stage-managed outcome
-
Moderates may gift Egypt to Islamists
By Linda S. Heard, Special to Gulf News
Liberals cannot afford to sit at home or in cafes watching queues lengthen outside polling stations. They must quit complaining and vote with their feet
-
Is Al Maliki serious about democracy and more words?
By Mohammad Akef Jamal, Special to Gulf News
He is pushing towards a military showdown with the Kurds at a time when they are stronger than ever before
Your turn
