The seeds of inflation have been firmly planted in Iraq, and the Central Bank Gov. is on it.
But rarely is the exchange rate seen for what it is: a relative price that, like any other, responds to the laws of supply and demand.
On the other hand, as a country becomes more closely integrated into the global financial system, a need evolves for some flexibility in the exchange regime (provided the technical expertise in policymaking is gained and other compensating adjustment mechanisms are inactive6).
The official interest rate in Iraq is more of a guide to bank rates than a direct monetary mechanism (sounds inactive to me) as the banking sector is small and capital markets are undeveloped.
"Monetary policy will follow developments in inflation," Shibibi said)
Concerns have been raised that these inflows can lead to asset price bubbles and put upward pressure on exchange rates. This can complicate the implementation of monetary and exchange rate policies, especially in those countries with less flexible exchange rate regimes.
Jan. 2010 WEO IMF
Asia Cell's switch from the dollar to IQD creates instant additional demand on the currency supply.
BP/CNPC's $500 Million FDI injection into drilling activities (and that's just one field) represents even more inflationary pressure.
Inflation is good, when the CBI Gov. states he will use it as an inflation controling policy instrument.
all from post I've previously posted here.....
