Deputy Governor of the Central Bank's "father" .. imported inflation and credit risk increase the interest rate
On: Tue 10/25/2011 10:45
Deputy Governor of the Central Bank of Iraq the appearance of Mohammed Saleh, the fact that the interest rate compared to the current inflation rate is negative 1%, indicating that lingered in the Central Bank to take measures in accordance with the theoretical mechanisms to counter this decline is due to the negative free interest rates of commercial banks under System of financial liberalization that has occurred since 2004.
Saleh told the correspondent of news agency Baghdad International that the highest interest rate is positive and relates to the monetary policy of the Central Bank of Iraq is what has been achieved in the month of January of this year, which amounted to 3% in the affirmative, noting that the central bank to take a standard in calculating the interest rate is that interest rates real and positive, which is calculated by calculating the interest rate minus the inflation rate basis.
Saleh said inflation, which happened recently in Iraq, inflation is influenced by inflation in foreign markets where inflation inside Iraq affected by inflation and the external called imported inflation, and that this accumulation led to inflation in that there will be a decline in real interest rate to be negative.
Saleh said that the lending market in Iraq involved a number of factors where taken into account several factors, including taking credit risk and market risk and other risks is what makes the interest rate on loans is high, indicating that the average interest rate on lending loans in Iraq for a year of not less than 14% to 15%, and that the spread between the interest in the deposit and borrowing high up to 9 points, sometimes reflecting the fragility of the market and uncertainty, considering that the market is immune to the issue of interest rates and it is right to increase the central bank interest rates, especially as the Central Bank adopted a monetary policy to cope with activity development in the country, expressing the hope that inflation is downwards.
He noted the benefit to the possibility of intervention of the central bank towards inflation control without reference to raise interest rates through the control of the levels of liquidity, which is the biggest strength and through expansion of open market operations, indicating that the control of the Central Bank of the levels of liquidity in Iraq is 100%, which is a positive point of the bank due to lack of control of any country in the world to levels of liquidity in the same proportion, especially since Iraq which the general budget pumps about 57% of demand in Iraq, which represents the expenditure as requested spending this is a blow to the monetary policy in Iraq, confirming receipt of monetary policy Many of these strikes, and faced by the central bank policies are called policy sterilization of liquidity, particularly for open market operations.
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