Abu Dhabi's cost of living steady despite fallout from geopolitical conflict

Inflation in Abu Dhabi stood at 1.52 per cent in September, with key components of its consumer price index diverging during the month as the economy navigated through the implications of the geopolitical conflict.

The UAE capital's consumer price index for September stood at 108.32, which was also a 0.73 per cent growth from the previous month, largely tugged by a 5.84 per cent growth in the recreation and culture sector, data from Statistics Centre Abu Dhabi showed this week.

It was also a bump up from the 1.25 per cent annual rate recorded in August.

Housing, water, electricity, gas and other fuels, the biggest component of Abu Dhabi's CPI at nearly a third, fell nearly 0.6 per cent on a monthly basis in September, although it was 4.5 per cent jump annually, Scad said.

Food and beverages, and transport, two sectors that also rely on energy costs, rose nearly 3 per cent and 2.03 per cent, respectively, month-on-month, but are notably down about 3.3 per cent and 1 per cent on a yearly basis.

Abu Dhabi's inflation remains lower than the latest readings of its peers in the Gulf and wider region, according to their respective latest government data.

Inflation in Dubai, meanwhile, eased slightly in September from the previous month, even as rising oil prices pushed up the cost of petrol. UAE authorities announced a surprise rollback in pump costs for November.

Inflation in the emirate, on an annual basis, stood at 5.03 per cent, down from the 5.54 per cent recorded in August and the 5.7 per cent peak for this year reached in June.

The latest figures come as markets keep a close eye on the Middle East after Washington signalled restraint over the Iran war.

Elevated inflation is a driver for the US Federal Reserve to keep interest rates higher. Central banks in the Gulf, whose economies are pegged to the dollar, traditionally follow suit.

US President Donald Trump, meanwhile, has stated that there might not be need for further action against Iran, even suggesting that the conflict might end "soon".

In the US, the CPI rose 0.4 per cent in October, slightly above projections for a 0.3 per cent rise, the Bureau of Labour Statistics said on Tuesday. In September, annual consumer inflation leapt 3.7 per cent - markedly above the US Federal Reserve's 2 per cent threshold.

Core inflation, which excludes volatile food and energy prices, rose 0.3 per cent for the third consecutive month, fuelling expectations of further interest rate increases.

Federal Reserve governor Christopher Waller said a half-percentage-point rate rise should be considered at the central bank's December meeting if core inflation remained elevated. Market bets on such an increase approached 15 per cent on Tuesday.

Gasoline prices, which includes all types, slid to a 1 per cent gain in October after spiking more than 9 per cent a month earlier.

Most rises in US CPI components suggested the effect of rising energy prices, particularly diesel, which peaked in September with a nearly 12 per cent climb. Food prices jumped 0.5 per cent, after posting slight increases since May, and even staying flat in September.

Eggs, fruits and vegetables, and dairy all rose 0.6 per cent, while grocery store prices added 0.4 per cent, as the cost of beef climbed 0.9 per cent.

Ahead of Tuesday's inflation report, Nick Spencer-Skeen, senior executive officer at Lunaro Markets, said the figures would provide the next major test for markets, particularly following Friday's stronger-than-expected payrolls print and increasingly hawkish Fed commentary.

"Attention will centre on whether recent energy price pressures have begun feeding into broader inflation. For markets, the balance of risks remains uncomfortable. A softer print could provide relief to Treasuries and equities following a volatile week, although resilient employment limits the scope for a sustained dovish repricing," he said.

"Conversely, another upside surprise would strengthen the case for a December hike. It would also put equity valuations under even more strain."