(MENAFN) Gulf Arab oil states may need to rethink longstanding economic policies, including their fixed exchange rates, over the next five to 10 years as economic cycles in the region and the US diverge, a senior Qatar central bank official said, Arab News reported.
The GCC nations have pegged their currencies to the US dollar or in the case of Kuwait, a page to a basket of currencies that is believed to be dominated by the dollar, to stabilize them.
But in recent years the GCC economies have moved more out of sync with the US, as the pegs press GCC policymakers to mirror the US central bank's decisions even if trends at home call for the contrary.
As long as they have currency pegs to the dollar, the Gulf states could face
destablishing capital outflows or inflows if they allow large interest rates gaps to open up with the US, but raising interest rates while Gulf economies are slowing could hurt growth further.
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