After that, economies of scale kick in so that McDonald's can afford to raise menu prices more slowly than local inflation.
If local inflation remains higher than that of the country to which the currency is pegged, the currencies of countries with currency boards can also become overvalued and uncompetitive.
Many of the region's currencies are pegged to the dollar, an arrangement blamed for overheating local economies and importing inflation, which is as high as 11% in the UAE and 14% in Qatar.
Many Latin American companies also state results in dollars as well as the local currency, in part because high domestic inflation rates in the 1980s made it difficult to compare local-currency results from one year to the next.
He said the wide deficit is weakening the local currency and may fan inflation that has slowed in recent months.
The National Audit Office said increasing housing allowances in line with inflation rather than local rents could lead to "significant problems".
Even those would not be allowed, by law, to exceed the inflation rate unless local voters said otherwise in a referendum.
There is a growing belief that to take a look at the prices of everyday items in a local supermarket is to see inflation coming around the corner.
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According to the World Bank, good monsoon rains this year and a stable local currency could further reduce inflation from current levels, allowing the central bank to further ease monetary policy after cutting its key lending rate twice already this year.
Lastly, the government has also discovered that media, especially social media, can be an effective tool in gauging public opinion on everything from broader national topics like inflation down to very local issues like land redevelopment.
The Transport Workers Union Local 100 wants wage increases pegged to inflation, the first specific salary demands made in negotiations between the transit union and the MTA, according to people close to the negotiations.
Inflation was tamed, and spendthrift local and federal governments were required by law to rein in their debts.
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According to estimates from analysts as well as local and foreign banks, Peru will register the lowest inflation rate in Latin America during this year and 2009.
As expected, Brazil imposed a 6% financial transactions (IOF) tax on offshore loans as part of a series of planned measure to curb inflation by limiting credit, and keep the local currency in check.
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It says that any state or local tax change that increases revenue, after allowing for inflation and population growth, must be approved by a popular vote, and that any budget surplus must be returned to the people.
Curiously, at the same time, economic stress can lead to manipulation of foreign-exchange rates, usually to keep local currencies relatively low even as nominal interest rates rise with inflation.
So while commercial real estate could be a good inflation hedge, it depends on the strength of the local market in which the individual asset competes.
Brazil is also wrestling with inflation, thanks to a QE2 fed commodities bubble and local demand for credit and consumer goods and services driving up prices.
This at a time when state and local tax receipts are growing at two to three times the rate of inflation.
The watchdog also raised concerns about the decision to uprate local housing allowance - which covers private accommodation - by the CPI rate of inflation rather than pegging it to average rent rises in an area.
The official value of the local currency has plummeted by a factor of 16 in the past year, with inflation at over 780%.
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The cap, enacted as a step toward controlling property tax rates that are among the highest in the nation, generally restricts districts and local governments from increasing their tax levy by more than 2 percent or the rate of inflation, whichever is less.
Rising inflation means rising interest rates, and that means more fixed income investors pouring money into Brazilian local government bonds that pay well over 11% annually.
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The report coincided with a withdrawal of deposits and investments from the UAE by speculative investors who had previously been betting that local currencies would shoot up as Gulf states let go of their dollar pegs to deal with double-digit inflation.
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