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Huizencrisis in VS heeft nog een heel eind te gaan..
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Saturday, February 2, 2008, 2:10PM ET - U.S. Markets Closed.
Housing Meltdown
by Peter Coy
Friday, February 1, 2008
provided by
Why home prices could drop 25% more on average before the market finally hits bottom
As Washington policymakers struggle to keep the U.S. out of recession, the swirling confusion over the housing market is making their job a lot tougher. Will American consumers keep shopping or be forced to pull back? Will banks lend freely or be hamstrung by mortgage defaults? What are the best policy options right now? Those and other important questions simply can't be answered without a good idea of whether home prices will rise, flatten out, or keep dropping.
Some experts have begun to suggest that a bottom is in sight. Pali Research analyst Stephen East wrote in a research note to his firm's clients on Jan. 25 that "the sun is not shining very brightly, but at least the worst of the storm has likely passed." With optimism budding, Standard & Poor's beaten-down index of homebuilder stocks soared 49% from Jan. 15 through Jan. 29.
More From BusinessWeek:
• Slide Show: Housing Prices Shed Gains?
• Slide Show: The 30% Dissolution
• Slide Show: Analyzing the Housing Crisis
But it's considerably more likely that the storm is still gathering force. On Jan. 30 the government said annual economic growth slowed to just 0.6% in the fourth quarter as home construction plunged at a 24% annual rate. The Standard & Poor's/Case-Shiller 20-city home price index fell 7.7% in November from the year before, the biggest decline since the index was created in 2000.
And that could be just the start. Brace yourself: Home prices could sink an additional 25% over the next two or three years, returning values to their 2000 levels in inflation-adjusted terms. That's even with the Federal Reserve's half-percentage-point rate cut on Jan. 30.
While a 25% decline is unprecedented in modern times, some economists are beginning to talk about it. "We now see potential for another 25% to 30% downside over the next two years," says David A. Rosenberg, North American economist for Merrill Lynch (MER), who until recently had expected a much smaller slide.
Shocking though it might seem, a decline of 25% from here would merely reverse the market's spectacular appreciation during the boom. It would put the national price level right back on its long-term growth trend line, a surprisingly modest 0.4% a year after inflation. There's a recent model for this kind of return to normalcy after the bursting of a financial bubble. The stock market decline that began in 2000 erased most of the gains of the boom of the second half of the 1990s, leaving investors with ordinary-sized returns.
Why might housing prices plunge violently from here? Remember the two powerful forces that pushed them up: lax lending standards and the conviction that housing is a fail-safe investment. Now both are working in reverse, depressing demand for housing faster than homebuilders can rein in supply. By reinstituting safeguards such as down payments and proof of income, lenders have disqualified thousands of potential buyers. And many people who do qualify have lost the desire to buy. "A down market is getting baked into expectations," says Chris Flanagan, head of research in JPMorgan Chase's (JPM) asset-backed securities group. "People say: I'm not buying until prices are lower.'" He predicts prices will fall about 25%, bottoming in 2010.
Nobody can be sure how far prices will decline. Still, if prices drop that much, it could mean big trouble for the U.S. economy, which is already on the brink of recession. It would blow a hole in the balance sheets of banks and households, slicing more than $5 trillion off household wealth. That's roughly the size of the drop in stock market wealth from the peak in early 2000, a big reason for the recession of 2001. Yale economist Robert J. Shiller, a longtime housing bear, points out that a housing decline that started in 1925 and ran until 1932 weakened banks and contributed to the Great Depression, which started in the U.S. in 1929.
MACARONI AND CHEESE
It has become a cliché, but an accurate one, that Americans used their homes as ATMs during the boom years. They lined up for cash-out refis or home-equity loans to turn housing wealth into spending money.
So far, the amount of equity being withdrawn has remained surprisingly strong—$700 billion at an annual rate in the third quarter. But it's bound to dwindle if prices keep falling, giving the economy a further downward push. According to an analysis conducted for BusinessWeek by Zillow.com, the real estate Web site, a further 20% decline in prices nationwide would mean that two-thirds of people who bought in the past year would owe more than their homes would be worth, meaning they couldn't take out cash if they wanted to.
Alesandra Sanchez, who works for the city of Las Vegas, and her husband, Craig Mireles, a project manager for an architect, are living that problem. Their house in Summerlin, Nev., has quickly gone from a money geyser to a drain. The couple raised about $70,000 in cash in 2005 by refinancing less than a year after they bought their home. They put the money toward student loans, medicine for Sanchez's rheumatoid arthritis, and other things. Now the cash is gone and the interest rate has ratcheted up to 11%. Alesandra says the new payment of $4,200 a month "is doablebut it's like eating macaroni and cheese: It doesn't leave room for anything else." No wonder that retail sales fell 0.4% in December, and economists are projecting a sharp slowdown in overall consumer spending this year.
More from BusinessWeek:
• Slide Show: Housing Prices Shed Gains?
• Slide Show: The 30% Dissolution
• Slide Show: Analyzing the Housing Crisis
The second shock to the economy from the housing bust will come from the financial sector, which has been weakened by losses on mortgages as well as mortgage-backed securities and more exotic derivatives. Banks borrow so much money to fund their investments that if a loss on some holding reduces their capital by $10, they have to reduce their lending by $100 to avoid exceeding their self-chosen leverage targets, calculates Goldman Sachs (GS) chief U.S. economist Jan Hatzius. He estimates that banks and other financial institutions will suffer about $200 billion in real estate losses and respond by cutting their lending by $2 trillion, or about 5% of total lending. The cutback could be even more extreme if they react to the turmoil by lowering their leverage ratios, he says, rather than keeping them intact. Banks have already begun tightening lending standards. In the third quarter, mortgages were harder to get than at any time in the 17-year history of the Federal Reserve's survey of senior loan officers.
Prices won't fall uniformly, of course. Once-booming cities such as Las Vegas and Miami and weak economies like Detroit are likely to fare worse than Seattle or Charlotte, N.C. The price decline will be smaller if it's stretched out over longer than, say, two years, because inflation will have more time to do some of the job of eroding the real value of homes. Still, if the national average decline is anywhere near 25%, the entire U.S. economy is in for trouble. Keep in mind, says Merrill's Rosenberg, that the relatively puny price decline to date has already pushed home-loan delinquencies to their highest level in 20 years. The plunge in residential construction reduced the economy's annual growth rate by a full percentage point in the third quarter of 2007. A bigger decrease would wipe out even more jobs—carpenters, real estate agents, mortgage brokers, furniture salespeople.
Starting in 2000, home prices soared far above their long-term trend. They've only just started to return to normal. This chart shows the history of home prices adjusted for inflation going back to 1890, compiled by Yale University economist Robert Shiller. The black line is BusinessWeek's calculation of the long-term trend growth rate: just 0.4% a year after inflation.
For American consumers, meanwhile, huge losses would almost certainly undermine the long-held premise that homeownership is the most reliable way to build wealth and a middle-class life. "I know you're not supposed to say I told you so,' but I'm at the age where I can do it: Homeownership was oversold," says 67-year-old House Finance Committee Chairman Barney Frank (D-Mass.).
One look at the long-term home price chart tells you all you need to know: Starting in 2000, prices crossed above their trend line and just kept going up. The spike had never happened in modern U.S. history, according to data dating back to 1890 that Shiller painstakingly compiled for the second edition of his book, Irrational Exuberance, in 2005. Back then he predicted a sharp drop in house prices.
Now he says lawyers won't let him publicly forecast home prices because he's involved in preparing the market-sensitive Standard & Poor's/Case-Shiller home price indexes. All he'll say is: "This is a historic turning point."
Optimists point out that the Fed, Congress, and the White House are all committed to keeping housing aloft so it doesn't kill the economy. The Fed reduced the federal funds rate by three quarters of a percentage point on Jan. 22 and followed with a half-point cut on Jan. 30—an extremely rapid move for a major central bank. Homebuilders also are doing their bit to support prices: They've cut production so drastically that even though home sales fell more than expected in December, the backlog of unsold new homes shrank slightly. Douglas Duncan, chief economist of the Mortgage Bankers Assn., predicts existing home prices will slip less than 2% this year before beginning to rebound in 2009.
Pessimists aren't impressed. One of the first high-profile bears on housing, Ian Shepherdson of consulting firm High Frequency Economics, is looking for a 20% decline in prices from their peak but says 40% wouldn't shock him. "We've never been here before, so there's no road map," he says.
There's even uncertainty about where prices are right now, since many would-be sellers are refusing to cut them enough to make a sale. A Harris Interactive (HPOL) survey for Zillow.com in December found that 36% of homeowners thought their homes had increased in value over the past year, vs. 23% who thought they had decreased. That willful optimism translates directly into the record overhang of unsold existing homes: more than 4 million.
For a truer picture of the market, look at sales by banks and builders, which don't have the luxury to wait things out because they have to worry about cash flow. Deutsche Bank (D , among other banks, has been slashing prices on repossessed homes to get rid of them. In a recent transaction mentioned on BusinessWeek's Hot Property blog, Deutsche Bank sold a house in Woodbridge, Va., in December for $150,000, less than half its last sale price of $315,000 in the spring of 2005. In November, Lennar (LEN), the big builder, sold 11,000 home sites to a joint venture it formed with Morgan Stanley Real Estate for $525 million, 60% below what they were valued on Lennar's books. That's capitulation, and it's likely to occur more often as sellers get the idea that waiting won't solve their problems.
MORTGAGE HURDLES
Plenty of other evidence supports the notion that home prices have further to fall. There's a crisis of confidence in the securitization of mortgages, which pumped up housing demand by giving buyers access to nationwide and even global pools of capital. The loose links in the securitization chain allowed risky loans to be made at low rates. Trust in that system is broken and will not be mended quickly.
Almost the only mortgages being securitized successfully are the ones bought by Fannie Mae (FNM) and Freddie Mac (FRE), the private companies with implicit government backing. They accounted for about 87% of mortgage securitizations in December, vs. fewer than half in 2005 and 2006, according to the publication Inside MBS & ABS and the investment bank UBS (UBS). Subprime lending is nearly shut down, home-equity loans and lines of credit are scarce, and jumbo mortgages (too big for Fannie and Freddie to purchase) command premium rates. A survey of real estate agents found that a third of planned home sales were canceled or delayed last fall because of loan problems.
Even Fannie and Freddie, which style themselves as the last resort of the home buyer, have tightened standards and raised fees. And they remain reluctant to raise funds to buy mortgages if it means lowering returns to shareholders.
Fannie Mae Chief Executive Daniel H. Mudd joked to Wall Street analysts in December that the process of cutting the dividend and selling preferred shares to raise money pained him so much that "I wanted to cut off both my arms and both my legs, and my head, and my kidney."
Cheaper mortgages won't necessarily ride to the rescue, either. Thirty-year conventional fixed-rate mortgages failed to fall after the Fed's two January rate cuts, averaging 5.5% on Jan. 30. Financing remains cut off for subprime borrowers (BusinessWeek, 12/11/07) and for owners whose home equity has dipped too low to qualify for a new loan. Fed rate cuts will ease, but not eliminate, the pain from resets on adjustable-rate loans.
More from BusinessWeek:
• Slide Show: Housing Prices Shed Gains?
• Slide Show: The 30% Dissolution
• Slide Show: Analyzing the Housing Crisis
For another bearish view, there's what economists refer to as the Mankiw paper. In 1989, long before working in the White House as chief economic adviser or writing his best-selling textbook, Principles of Economics, Harvard University economist N. Gregory Mankiw co-wrote a paper that was startlingly negative on housing. He and David N. Weil predicted that home prices would decline by 47% after inflation over the next 20 years, based on a shrinking pool of potential first-time buyers and an expectation that baby boomers as a group would spend less on housing as they grew older.
It could be that Mankiw and Weil were not so much wrong as premature. Although boomers have thwarted expectations by adding on rooms and second homes as they age, they won't thwart nature. "At some point, death or illness will cause baby boomers' houses to come onto the market," observed John Krainer, a senior economist at the Federal Reserve Bank of San Francisco, in an in-house publication in 2005. When the huge boomer generation shuffles off, the nation's housing needs will wane. That will create an oversupply unless builders see it coming and reduce construction. Judging from the recent overbuilding binge, though, their forecasting abilities leave a lot to be desired.
NECESSARY EVIL
Observers with a Calvinist streak see a housing crash as not only necessary but also positive. It will force Americans to live within their means, which will enable the U.S. to work off some of its towering debt, says Peter D. Schiff, president of Darien (Conn.) brokerage Euro Pacific Capital, who was early in predicting the crash. In 2005 the share of gross domestic product devoted to residential construction reached the highest since 1950, when the U.S. was racing to house the baby boom generation and make up for the lack of construction during the Depression and World War II. Now, says Schiff, "if there's any construction, it's going to be factories, oil exploration, mines." He takes almost unseemly delight in predicting tougher times ahead: "Americans are going to have their credit cards taken away from them by the lenders. We're going to turn the American economy into a cash economy."
Foreclosure counselors such as Mildred Wilkins foresee similar changes, except in looking back they put more of the blame for the fiasco on builders and lenders and less on borrowers. "We have been fed the illusion that acquiring a home was a magic key to stability, to wealth-building," says Wilkins, who travels the country advising lawyers and others on how to handle foreclosures. Even though she is president and founder of an Indianapolis company called Home Ownership Matters, which promotes responsible ownership, Wilkins says she never believed the "poppycock" that homeownership was a sure path to wealth, calling it a myth foisted on lower-income Americans by politicians serving the builders and bankers.
The sense of betrayal is probably most intense among the working-class families who were supposed to be the greatest beneficiaries of easy access to low-down-payment mortgages. The less-pricey outskirts of expensive cities such as Los Angeles and San Francisco are precisely the areas where the biggest share of recent buyers are underwater on their mortgages. Cindy and Larry Chaffold, who live in the desert east of Los Angeles in Apple Valley, bought a house for $216,000 in 2005 that's now appraised at $190,000. Cindy was ready to hand the keys to the bank until she got her loan modified.
Says Chaffold: "I have been screwed, chewed up, and spit out."
HARKING BACK TO FDR
If home prices really fall an additional 25%, Washington's rescue program is likely to seem seriously inadequate. So far the Bush Administration is pushing two main ideas: FHASecure, which offers new mortgages to certain well-qualified borrowers, and Hope Now, a private-sector program to streamline the modification of unaffordable loans. But FHASecure isn't open to people who are underwater on their mortgages—in other words, those who most need help. And the Hope Now alliance doesn't seem to be coping successfully with the mounting backlog of loan delinquencies. The other big Washington initiative, to crack down on loose lending practices, could be ineffective and even counterproductive, because it's making loan funding less available right when it's needed most.
The next big reform ideas may hark back to President Franklin D. Roosevelt. Many of the housing market's props today—including Fannie Mae and the Federal Housing Administration—were launched during the 1930s. If things get bad enough, say some analysts, it could raise interest in renewing another innovation of the Depression years, the Home Owners' Loan Corp., which lent money directly to hard-pressed borrowers to prevent foreclosure. If enough banks get into trouble, Congress might even create something roughly parallel to the 1980s-era Resolution Trust Corp., which cleared up the savings and loan crisis by shutting down weak thrifts, thus wiping out the investments of the owners, and then selling off their assets to the highest bidders.
And with homeownership no longer seeming like such a sure thing, national housing policy could become more evenhanded toward renters. Congress is weighing the creation of a National Affordable Housing Trust Fund that would build, rehabilitate, and preserve 1.5 million units of housing for the lowest-income families over the next 10 years. The national homeownership rate has already fallen about one percentage point from its peak, to 68.2% in last year's third quarter.
However things unfold, the changes are likely to be wrenching. The bigger the boom, the harder the fall.
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reacties: 2902
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Bush gaat de VS regelrecht in de afgrond storten!!
In 2012 zal de Yuan de nieuwe reservemunt zijn!
Laatste begroting Bush ultieme krachtmeting met Democraten
De Amerikaanse president, George W. Bush, stelt maandag de laatste begroting van zijn ambtstermijn voor. Nu al is zeker dat zijn plannen op zwaar verzet zullen botsen van de Democraten, die het Huis van Afgevaardigden controleren. Naast verkiezingskoorts zal ook het barre economische klimaat de toon alleen maar verharden.
(reuters/tijd) - De Democraten zijn vooral boos omdat Bush het oplopende begrotingstekort probeert onder controle te krijgen met nieuwe besparingen in de gezondheidsprogramma’s voor bejaarden en sociaal zwakkeren.
Zowat alle details van de ontwerpbegroting zijn de afgelopen dagen al uitgelekt in de pers. Als Bush zijn zin krijgt, zal de Amerikaanse regering in het fiscale jaar 2009, dat op 1 oktober 2008 begint, meer dan 3.000 miljard dollar uitgeven. Het tekort zou zowel in 2008 als in 2009 oplopen tot 400 miljard dollar, wat ongeveer overeenkomt met 2,8 procent van het bruto binnenlands product. Daarmee komt het gat in de Amerikaanse schatkist weer alarmerend dicht bij het recordtekort van 413 miljard dollar in 2004.
Toch blijft het Witte Huis erbij dat het mogelijk zal zijn de belofte na te komen om tegen 2012 opnieuw een begroting in evenwicht te hebben, en dat zonder dat moet worden geraakt aan de toegekende belastingverlagingen. Normaal lopen die in 2010 af, maar zowat alle Republikeinse presidentskandidaten hebben van de verlenging ervan een sleutelelement gemaakt in hun programma.
De Democraten hebben de grootste twijfels bij de uitvoerbaarheid van die beloftes. En omdat zij de meerderheid hebben in het Huis van Afgevaardigden kunnen ze het de president knap lastig maken. Toch moet de begroting minstens één onderdeel bevatten waarover beide kampen het eens zijn. Het Witte Huis en de Democraten leggen op dit moment de laatste hand aan een 150 miljard dollar zwaar noodpakket om de slabakkende economie te helpen.
Toch wordt de ‘nationale veiligheid’ ook dit jaar de winnaar van de begrotingsslag. Bush wil in totaal 550 miljard dollar vragen voor defensie. Daar komt nog eens 70 miljard bij voor de oorlogen in Irak en Afghanistan. Dat laatste bedrag geldt enkel voor de eerste maanden van het fiscale jaar 2009. Later zal hij bijkomende bedragen vragen voor de rest van het jaar. Overigens houden de Democraten in het Congres nog altijd een deel van zijn oorlogsbegroting voor het lopende jaar 2008 tegen. Ook de binnenlandse veligheidsprogramma’s mogen op extra geld rekenen. Een flink deel daarvan zal worden gebruikt voor het versterken van de bewaking aan de Mexicaanse grens. Vooral bij de Republikeinen in het zuiden van de VS is de illegale immigratie dan ook een ‘hot issue’.
Bevriezen
Ondertussen ligt de president steeds meer onder vuur van zijn partijgenoten, omdat hij er maar niet in slaagt het begrotingstekort onder controle te krijgen. Bush probeert die kritiek te counteren, maar de manier waarop hij dat doet, brengt hem weer op ramkoers met de Democraten. Buiten de veiligheidsprogramma’s wil hij het overgrote deel van de binnenlandse uitgaven bevriezen. In de gezondheidsprogramma’s voor bejaarden, gehandicapten en sociaal zwakkeren, Medicare en Medicaid, wil hij in de loop van vijf jaar 208 miljard wegsnijden.
Die combinatie van extra geld voor de oorlogsinspanningen en besparingen in de gezondheidszorg maakt de Democraten woedend. De Democratische voorzitster van het Huis van Afgevaardigden, Nancy Pelosi, zei al ‘dat de president beter zou samenwerken met het Congres om een begroting op te stellen die ervan uitgaat dat een betaalbare gezondheidszorg een prioriteit is.’
De meeste waarnemers gaan ervan uit dat het barre economische klimaat beide partijen zal dwingen in hun verlanglijstjes te snoeien. Officieel blijft het Witte Huis ervan uitgaan dat de VS-economie dit jaar met 2,7 procent groeit en dat er geen kans is op een recessie. Maar een selecte groep van Amerikaanse topeconomen gaat nu uit van slechts 2,2 procent groei. Die groep meent ook dat er 38 procent kans op een recessie is. IB
19:44 - 03/02/2008
Copyright © De Tijd
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Arie$$
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03-02-2008 om 20:23 uur
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misschien wordt het maar eens tijd dat ik winst neem op mijn dollars en voor goud ga  als ik het goed heb ligt de goudprijs op dit moment onder de 910?
lijkt me gezien de omstandigheden het perfecte moment om in te stappen voor wie dat nog niet gedaan heeft
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Het huidige (zoveelste) debacle in de Amerikaanse economie illustreert nog maar eens hoe naief de amerikanen zijn; daarbij heb ik het zowel over zowel de 'gewone' burger als over de bedrijven en overheid. Een allesoverheersende kortetermijnbehoeftebevrediging zorgt voor bubbels die met een beetje rationaliteit duidelijk te dedecteren zijn. Doch houdt men zolang mogelijk het positieve sentiment in dergelijke situaties aan om dan met een harde landing weer met beide voetjes op de grond te komen. Vervolgens wordt opnieuw, zonder blijkbaar iets uit het verleden te hebben geleerd, naar een nieuwe bubbel toegewerkt; dat alles om toch op korte termijn weer positief te kunnen wezen. Amerikanen voelen zich beangstigend superieur tegenover de rest van de wereld. Het spijtige van de zaak is dat wij nog altijd te veel naar Amerika kijken wat betreft de financieele markten. Het wordt nu stilaan tijd om de zaken eens in een juist perspectief te zien; m.a.w. te zien dat de rest van de wereld steeds meer aan invloed op economisch gebied wint. Vooral het oosten is een groeiende factor in de wereldeconomie. De komende jaren zal het tot een nieuw evenwicht in de bedrijfs- en dus beurswereld komen. Deze globalisering kan alleen maar positieve resultaten opleveren. Als Amerika niest zullen we misschien nog wel een koudje vatten, maar niet direct ziek te bed liggen. Minder spectaculaire ups en downs zullen het beleggersvertrouwen aansterken. Nu ook is het negatieve zowel als het positieve beleggersentiment veel te veel te veel overdreven door deze onzekerheid. vb.: De europese beurzen hebben in januari flinke klappen gekregen. Waarom? Welliswaar is er een kleinere europese economische groei; maar het is groei. De bedrijfswinsten zijn helemaal niet slecht. Sectoren die helemaal niets met de subprime crisis te maken hebben, worden ook afgestraft. Online-brokers die normaal uit de huidige volatiliteit op de beurs, voordeel halen, worden zomaar over dezelfde kam geschoren van andere banken die mogelijk wel in grotere of kleinere mate nadelen van de subprime-crisis ondervinden enz. Om meer concreet te reageren op bovenstaand artikel. De huizencrisis zal inderdaad nog wel verdere uitwassen laten zien; maar ik geloof dat het ergste leed toch wel geleden is. Als het amerikaanse bedrijfsleven binnenkort weer betere resultaten laat noteren en ik zie dat toch wel rooskleurig in, zal de sneeuwbal opnieuw wel naar boven rollen. Er zit momenteel veel cash te wachten en de gretigheid om laag in te stappen is groot. Volgens mij dus een korte recessie (2 kwartalen ong.) met daarna heropleving en een goede tweede jaarhelft. 2009 staat de subprime-crisis in de geschiedenisboekjes. Hopelijk hebben de amerikanen een lesje geleerd en spenderen ze hopelijk minder geleend geld.
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Dollar krijgt steeds minder aantrek van de tulbanddragers!!
Qatar considers dropping dollar peg
By Simeon Kerr in Dubai
Published: January 30 2008 19:59 | Last updated: January 30 2008 19:59
Qatar is reviewing its currency policy and could revalue or drop the dollar peg as the booming Gulf state struggles to tame inflation while the US reduces interest rates to head off a recession.
Qatari officials on Wednesday said the gas-rich emirate was considering revaluing its currency or linking it to a trade-weighted basket of currencies as well as other policy proposals aimed at cooling rampant inflation of up to 15 per cent.
EDITOR’S CHOICE
Gulf oil boom spreads to poorer lands - Jan-19Inflation gives Saudis food for thought - Jan-18Governor calls on UAE to curb inflation - Jan-15Saudis urged to revalue riyal - Jan-13China 2007 trade surplus a record $262bn - Jan-11Abdullah al-Attiyah, the oil minister and deputy prime minister, on Wednesday said the central bank and finance ministry were studying a currency revaluation, but he did not say when any decision would be made.
Ibrahim Ibrahim, an economic adviser to the government, said official policy remained to maintain the Qatari riyal’s peg to the dollar, but that could change with time. “The official position is we won’t delink but that doesn’t mean for ever – it means in the foreseeable future,” he told the Financial Times.
Qatar may host the region’s largest US military base but it is also known as a policy maverick, perhaps less daunted than most of its Gulf neighbours about taking the politically sensitive decision of severing the long-held tie to the dollar.
Kuwait last year became the only Gulf country to move from a dollar peg to a basket of currencies. It has allowed the dinar to rise 6 per cent since its decision.
After speculation of an imminent revaluation in the United Arab Emirates last month, the five Gulf Co-operation Council states still linked to the dollar agreed to maintain the peg and co-ordinate policy while seeking to unify their currencies by 2010.
Qatar, which is a member of the GCC, is constrained in its fight against inflation because the dollar peg forces it to track US monetary policy.
Doha’s central bank has cut its deposit-facility rate by 150 basis points in four moves since September 18, tracking moves by the US Federal Reserve.
However, a recent central bank report attributed rising inflation mainly to domestic, growth related factors.
Mr Ibrahim, who heads a government body that charts economic development, said other inflation-taming measures were under consideration. He said Doha will issue bonds to soak up liquidity and give the central bank more control over monetary policy, and is considering reducing government spending and placing lending caps on banks.
Copyright The Financial Times Limited 2008
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