Inflation in Bahrain rose to 1.6 per cent in December as a result of higher food and drink prices.

In November, inflation in Bahrain was 1.1 per cent. It peaked at 6.3 per cent in July 2008 and was low throughout 2009, and there was even deflation of 0.27 in May 2009.

The latest figures released by the Central Informatics Organisation in Bahrain show food and drink costs rose by 0.95 per cent in December, while restaurant prices increased by 6.23 per cent.

The IMF is forecasting that inflation will average 2.5 per cent in Bahrain in 2010.

The latest figures from the Central Bank of Bahrain show M3 money supply, the broadest measure of all the money in the economy, rose by just 3 per cent in November. Money supply is seen as an indicator of future inflation and in Bahrain it has fallen significantly since hitting almost 37 per cent in June 2008.