The Central Bank of the United Arab Emirates (CBUAE) announced on Wednesday that it would raise its base rate by 50 basis points to 2.25 percent.
This was implemented in tandem with the Federal Reserve of the United States of America’s decision — the UAE dirham is tied to the US dollar at a fixed exchange rate of 3.67 — in order to combat inflationary pressures in the oil-dependent economy.
Annual inflation in the UAE jumped to 2.58 percent in November 2021, up from 1.86 percent the previous month, according to data from the National Bureau of Statistics. Inflation rose for the fourth month in a row, reaching its highest level since September 2018. Food and beverages, restaurants and hotels, housing and utilities, and miscellaneous goods and services all felt the inflationary pressures. A litre of petrol and diesel costs Dh 3.66 (Super 98) and Dh4.08, respectively, as of Friday.
Fuel costs have risen by 20% in the last two months, with motorists facing a double-digit increase in the future months as a result of Russia’s military assault against Ukraine, which began on February 24 and sent the world economy into a tailspin.
The transportation component of the UAE’s consumer price index (CPI) saw the highest increase last year, rising 18% year on year by December and averaging 9% over 2021. Fuel prices and car costs have grown dramatically in the recent year.
Housing (34.1%), food and soft drinks (14.3%), and transportation (14.3%) are the primary components of CPI in the UAE (based on a national index with a base of 100 as of 2014). (14.6 per cent). Education, for example, contributes for 7.7%; miscellaneous products and services (6.3%); furniture and household goods (5.6%); communications (5.4%); restaurants and hotels (4%); recreation and culture (3.2%); textiles, apparel, and footwear (3.2%); medical care (1.4%); and beverages and tobacco (1.4%). (0.3 per cent).
The CPI in the UAE tracks changes in consumer prices for a basket of goods and services.
According to published statistics, the UAE’s average annual inflation rate between 2008 and 2022 was 2.2 percent. Between 2008 and 2020, the average rise in the price of a commodity is 28.97%. So, an item that cost Dh100 in 2008 may be purchased for Dh128.97 in early 2021.
