Wednesday, August 13, 2008

IMF to Saudis: Quit Bailing Out the Dollar By Creating Domestic Inflation

International Monetary Fund officials said the peg of the Saudi riyal to the U.S. dollar has been a great “anchor” for the Persian Gulf but recommended that Saudi officials consider alternative exchange rate regimes if inflation worsens.

“Most directors considered the benefits of maintaining the peg to outweigh the cost of higher short-term inflation, provided current inflationary pressures prove temporary,” IMF board directors said in a report on Saudi Arabia released Tuesday. “If, however, inflation should persist and the Gulf Cooperation Council monetary union be delayed, they recommended to consider also alternative
exchange rate regimes.”

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