The Financial Crisis: Fall in Oil Prices Douses Persian Gulf's Inflation
DUBAI -- The double whammy of tumbling oil prices and tight credit isn't all bad news for the petro-states of the Persian Gulf.</br></br>For the time being, it's providing a much-needed breather from breakneck growth that just a few months ago threatened to overheat the region's small but booming economies.</br></br>Oil prices would have to fall much further -- and stay low for perhaps several years -- before crimping government budgets. Meanwhile, a sudden slowdown in local and international financing could do what the region's central bankers have so far failed to: rein in the region's runaway inflation.</br></br>Five of the six countries that make up the Gulf Cooperation Council, a political and economic alliance, peg their currencies to the U.S. dollar, forcing regional central bankers to follow the U.S. Federal Reserve's moves on interest rates.</br></br>That has robbed them of the ability to use rate cuts to cool their own exploding, petrodollar-fueled economies. A weakened dollar has also stoked prices in the import-dependent region.