Abu Dhabi is considering active monetary and fiscal policy actions at the federal level to check the impact inflation on the economy.

In view of the growing worries of business establishments on the rising cost of doing business, the recently-published Policy Agenda 2007-08 promises action in terms of monitoring and measuring the cost differences while executing policy measures to cool the rising costs, a Gulf News report said.

The agenda said the true inflation rate is poorly understood due to deficiencies in the calculation and the weightage assigned to various components of consumer price index (CPI). The government has promised to create more comprehensive index.

While the Abu Dhabi Chamber of Commerce and Industry has estimated six per cent inflation for the emirate in 2005-06, the Ministry of Economy recently said inflation for the UAE in 2006 was 9.3 per cent and the International Monetary Fund has estimated it above 10 per cent, the report said.

On the exchange rate regime and its impact on inflation, the policy agenda said: "The effect of international currency trends will be monitored and appropriate policy tools will be employed to achieve macro economic stabilisation."