Lebanon central bank sees higher inflation, no rate rise

Lebanon's central bank governor said on Thursday he expected 2011 inflation to reach up to 7 per cent and that he would seek to contain levels by managing liquidity rather than raising interest rates.

"Indications for inflation expected this year are between 6 percent and 7 per cent. We hope that with the regression in prices of basic goods, that these indications will be closer to 4 per cent," Salameh said in a statement.

Salameh said the higher levels were a result of a global increase in prices rather than due to domestic factors and therefore would not raise interest rates to tackle inflation.

"We seek to manage liquidity to prevent the spreading of higher prices across all sectors," Salameh said, without elaborating.

Lebanon managed to keep inflation below 5 per cent in 2010. Soaring clothing and footwear costs was one of the main driver behind inflation in 2010. Consumer price inflation reached 5.8 per cent year-on-year in February.

The Lebanese economy is expected to project 2.5 per cent growth from an earlier projection of about 5 per cent, due to political bickering that has prevented the formation of a government, hence harming the economy.