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Saudi Inflation Continues to Decline

The inflation index records monthly decline in Saudi Arabia. (SPA)
The inflation index records monthly decline in Saudi Arabia. (SPA)
    Riyadh - Fatehelrahman Yousif and Mohammed Al-Mutairi
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Saudi Inflation Continues to Decline

The inflation index records monthly decline in Saudi Arabia. (SPA)
The inflation index records monthly decline in Saudi Arabia. (SPA)

Saudi Arabia’s inflation rate dropped to 2.7 % in March, against 3 % recorded in February, according to the latest report released by the General Authority for Statistics (GASTAT).

The consumer price index bulletin of March attributed the Kingdom’s low inflation to the strength of the Saudi economy and the measures taken to deal with the supply chain crisis after the outbreak of the coronavirus pandemic.

The Kingdom's decision to fix the upper ceiling for energy prices, which demonstrates the Saudi economy's strength, flexibility, and exceptional capacity to withstand shocks, is another reason for the low inflation rate, according to the report.

Speaking to Asharq Al-Awsat, economist at King Faisal University Mohammed bin Delim Al-Qahtani said that the stability of inflation rates in Saudi Arabia provides a global example in combating and curbing inflation.

He added that it proves the Saudi economy’s continued growth and is a clear indication of the success of the Kingdom’s financial and monetary policies in preventing and containing inflation.

Al-Qahtani attributed the control of inflation to the diversity and balance of the Saudi economy, which is no longer reliant on a single source such as oil.

He pointed out that the Saudi economy is now showing its true face by relying on non-oil sectors and the emergence of several service sectors.

Additionally, the geopolitical stability created by the Kingdom and the recent upgrade of Saudi Arabia's credit rating by Fitch to “A” with a stable outlook have all earned the country respect as an exemplary state that has been able to adapt to the toughest economic conditions.

Meanwhile, Osama bin Ghanem Al-Obaidi, advisor and professor of international commercial law at the Institute of Public Administration in Riyadh, explained that the Saudi government has successfully curbed inflation by avoiding disruptions in the food supply chain linked to the Russian-Ukrainian conflict, diversifying sources of imported food and stabilizing fuel prices in the Kingdom.

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Federal Reserve Cuts Key Interest Rate by a Quarter-point

US Federal Reserve Chair Jerome Powell attends a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, US, November 7, 2024. REUTERS/Annabelle Gordon
US Federal Reserve Chair Jerome Powell attends a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, US, November 7, 2024. REUTERS/Annabelle Gordon
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Federal Reserve Cuts Key Interest Rate by a Quarter-point

US Federal Reserve Chair Jerome Powell attends a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, US, November 7, 2024. REUTERS/Annabelle Gordon
US Federal Reserve Chair Jerome Powell attends a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, US, November 7, 2024. REUTERS/Annabelle Gordon

The Federal Reserve cut its key interest rate Thursday by a quarter-point in response to the steady decline in the once-high inflation that had angered Americans and helped drive Donald Trump’s presidential election victory this week.
The rate cut follows a larger half-point reduction in September, and it reflects the Fed’s renewed focus on supporting the job market as well as fighting inflation, which now barely exceeds the central bank’s 2% target, The Associated Press reported.
Asked at a news conference how Trump's election might affect the Fed's policymaking, Chair Jerome Powell said that "in the near term, the election will have no effects on our (interest rate) decisions.”
But Trump’s election, beyond its economic consequences, has raised the specter of meddling by the White House in the Fed’s policy decisions. Trump has argued that as president, he should have a voice in the central bank’s interest rate decisions. The Fed has long guarded its role as an independent agency able to make difficult decisions about borrowing rates, free from political interference. Yet in his previous term in the White House, Trump publicly attacked Powell after the Fed raised rates to fight inflation, and he may do so again.
Asked whether he would resign if Trump asked him to, Powell, who will have a year left in his second four-year term as Fed chair when Trump takes office, replied simply, “No.”
And Powell said that in his view, Trump could not fire or demote him: It would “not be permitted under the law,” he said.
Thursday’s Fed rate cut reduced its benchmark rate to about 4.6%, down from a four-decade high of 5.3%. The Fed had kept its rate that high for more than a year to fight the worst inflation streak in four decades. Annual inflation has since fallen from a 9.1% peak in mid-2022 to a 3 1/2-year low of 2.4% in September.
When its latest policy meeting ended Thursday, the Fed issued a statement noting that the "unemployment rate has moved up but remains low,” and while inflation has fallen closer to the 2% target level, it “remains somewhat elevated.”
After their rate cut in September — their first such move in more than four years — the policymakers had projected that they would make further quarter-point cuts in November and December and four more next year. But with the economy now mostly solid and Wall Street anticipating faster growth, larger budget deficits and higher inflation under a Trump presidency, further rate cuts may have become less likely. Rate cuts by the Fed typically lead over time to lower borrowing costs for consumers and businesses.
Powell declined to be pinned down Thursday on whether the Fed would proceed with an additional quarter-point rate cut in December or the four rate cuts its policymakers penciled in for 2025.