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Thu 30 Aug 2007 12:17 AM

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Rate hike brings down Iraq inflation

Inflation down to 30% in July compared with January's 66% after government raised interest rates.

Iraq's inflation fell to 30.6% in July compared with January's 66% after the government raised interest rates and a stronger dinar made imports cheaper, the deputy central bank governor said on Wednesday.

Inflation may fall to an average of 20% this year, Ahmad Mohamad al-Juboory told Reuters on the sidelines of an Iraq reconstruction conference in Dubai.

Iraq raised its policy rate, an indicative interest rate for banks to follow, to 18% from 10% at the start of year, Juboory said.

The dinar now trades at 1.223 to the dollar, versus 1.400 at the start of the year, he said, adding that poor security and higher fuel prices were driving inflation.

Sectarian violence and an insurgency against the US-backed Baghdad government has disrupts energy supplies and transport causing shortages of gasoline and other household commodities.

Annual inflation hit 76.6% in August last year when the central bank warned the country was sinking into "stagflation" - economic stagnation and soaring inflation.

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