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Fri 26 Dec 2008 04:10 PM

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Iraq's central bank set to slash interest rates

Finance chiefs to cut rates by 1% point to 14% in bid to stimulate growth.

Iraq's central bank has decided to slash interest rates by one percentage point to 14 percent starting Jan. 4, as inflation falls, in order to boost growth dented by sliding oil prices, the bank said in statement.

"Owing to the fall of consumer price index in November and seeking to boost gross domestic product (GDP) ... the Iraqi central bank decided to cut rates to 14 percent from 15 percent, starting from January 4th," the statement said.

Iraq's core inflation fell to an annual 12.7 percent rate in November, from 13.6 percent in October.

The IMF said last week that economic activity had picked up in Iraq as violence falls, but that the steep fall in oil prices had worsened its fiscal outlook. It did not give figures for GDP growth.

A previous IMF forecast in September had predicted growth of 9 percent for 2009, but with oil sliding as the global economy moves into recession, that now seems unlikely.

Crude, which supplies some 95 percent of Iraqi government revenues, traded at $36 a barrel on Friday, down $110 a barrel from its mid-July peak.

In November, Iraq's central bank cut interest rates by one point to help shield Iraq's economy from the global financial crisis. (Reuters)

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