Iraqi central bank governor sees lower rates ahead

Iraqi central bank governor sees lower rates ahead
January 19, 2010 12:10pm
by Emma Saunders

Iraq’s central bank governor, Sinan al-Shibibi, told Reuters rates are likely to fall below their current 7 per cent, depending on inflation. “Probably they are going to be lower than 7 percent. But of course this will depend on inflation vis-a-vis growth.” he said. “We’ll have to monitor very closely.” The central bank dropped its policy rate to 7 per cent from 9 per cent last June in line with a fall in inflation. The official interest rate in Iraq is more of a guide to bank rates than a direct monetary mechanism as the banking sector is small and capital markets are undeveloped (from Reuters). Other rates include 5.2 per cent on 6-month bills and 5 per cent on 7-day deposits.

Tags: interest rates, iraq

January 19, 2010 12:10pm in Middle East, interest rates | Comment

TOKYO, Jan 19 (Reuters) - The Iraqi central bank is likely to lower
interest rates from their current 7 percent, but the extent of any cuts
will depend on inflation, the bank's governor said on Tuesday.

Sinan al-Shibibi also told Reuters Television in Tokyo that he does not
expect any major disruption to the country's economy from an upcoming
election in March, seen as a crucial test for Iraq as it tries to pull
away from the bloodshed that followed the 2003 U.S.-led invasion.

The central bank brought down interest rates to 7 percent from 9 percent last June in line with a fall in inflation.

"Probably they are going to be lower than 7 percent. But of course this
will depend on inflation vis-a-vis growth." he said. "We'll have to
monitor very closely."

The official interest rate in Iraq is more of a guide to bank rates
than a direct monetary mechanism as the banking sector is small and
capital markets are undeveloped.

"Monetary policy will follow developments in inflation," Shibibi said,
adding that the central bank has managed to bring down inflation using
monetary policy.

Inflation has come down to around 6.0 percent, Shibibi continued.
Though volatile, core CPI inflation was 9.2 percent at the beginning of
last year.

Shibibi said the Iraqi economy, driven mainly by oil production, is
expected to grow a little bit more than the IMF's projection of 5.8
percent this year, shrugging off concerns about security ahead of the
March 7 election.

The government of Shi'ite Muslim Prime Minister Nuri al-Maliki is
seeking re-election but the country is still dogged by sectarian
violence.

"It (violence) will die down once the economy grows more and income
levels increase," Shibibi said. (Reporting by Kei Okamura and Hideyuki
Sano; Editing by Joseph Radford)

The central bank dropped its policy rate to 7 per cent from 9 per cent
last June in line with a fall in inflation. The official interest rate
in Iraq is more of a guide to bank rates than a direct monetary
mechanism as the banking sector is small and capital markets are
undeveloped