Inflation Reached 33.9% by the End of November; Hope for a Decrease in Inflation Rate

"The good news is that in November, compared to previous months, the monthly inflation rate decreased by one-third." This is the optimistic announcement of Hassan Rouhani, made on Sunday, December 4, in the presence of several ministers, representatives, and officials. The President of Iran cites statistical reports from the Statistical Center of Iran and the Central Bank regarding the inflation rate for November. According to the Statistical Center of Iran, the monthly inflation rate in November reached 2.1%, while the monthly inflation rate for October was 7.1%. The Statistical Center of Iran announced the inflation rate for November as 34.9%. The monthly inflation rate reflects the increase in the general price level of goods and consumer services over a one-month period. The significance of this inflation rate is the immediate perception and feeling of price increases, and by studying the trend of this monthly inflation rate, annual and average inflation rates can be assessed. In the report from the Central Bank of Iran regarding November inflation, the monthly inflation rate has also decreased to 3.5%, repeating the downward trend of monthly inflation rates for the second consecutive month. However, Hassan Rouhani's good news is only one side of the coin, the other side being the increase in point-to-point inflation rates and average inflation in November, a side he, as the head of the government, is not particularly keen to discuss. The decrease in the monthly inflation rate does not mean that the point-to-point inflation rate and the average twelve-month inflation rate also experienced a downward trend. According to the Central Bank's report, the point-to-point inflation rate in November this year reached 39.9%, which is a three percentage point increase compared to the point-to-point inflation rate of 36.9% in October. It should not be overlooked that despite the continued growth of the point-to-point inflation rate in November, the rate of increase has slowed down, and if this trend continues, it can be expected that in winter, even the point-to-point inflation rate may begin to decline. The point-to-point inflation rate compares the inflation of each month with the inflation of the same month last year, essentially embedding an annual comparison in its memory. However, another inflation rate in the Central Bank's report regarding the increase in the price index of consumer goods and services in November is the average inflation rate for the twelve months leading up to this month, which is reported as 18.4%, indicating a 2.5 percentage point increase compared to the average inflation rate of 15.9% in October. The Central Bank of Iran also reported the inflation rate in urban areas of Iran, broken down by expenditure deciles. In this report, the average inflation rate for the first expenditure decile is reported as 15%, while the average inflation rate for the tenth expenditure decile is recorded at 21.8%. In other words, the wealthy have borne higher costs due to greater consumption and also because they consume goods and services that experienced higher inflation this month. In the Central Bank's report, the consumer price index in urban areas of Iran in November this year reached 153.6, which compared to the index number at the end of last year, indicates a recorded inflation of 33.9% by the end of November this year. In other words, in these eight months, the monthly inflation index has grown by an average of 4.2%, and if this monthly growth trend continues until the end of the year, a 51% inflation rate by the end of the year will not be far-fetched, although the monthly inflation rate for November was recorded below this average, suggesting that if this trend continues, a lower inflation rate may be observed by the end of this year. Analyzing the changes in the "specific" inflation groups in the Central Bank's report clearly shows that the driving force behind the overall inflation index increase is the inflation of "goods", with a goods inflation rate of 61.9% in November, while the main "services" group inflation was recorded at 19.3% this month. Among the main groups constituting the inflation rate in November, as in previous months, the point-to-point inflation rate for the "tobacco" group leads inflation, with a price increase of 150.8% compared to the same month last year. However, this inflation rate is lower than in previous months, and even the monthly inflation for this group has turned negative, a new phenomenon in recent months. The increase in the price index for this group was mainly influenced by the increase in the price of the dollar and other currencies, as the tobacco market in Iran remains dominated by foreign products, both legal imports and smuggling. The second and third highest inflation rates belong to the "recreation and cultural affairs" group with 86.5% inflation and the "furniture, household goods, and services" group with 83.1% inflation, respectively. The increase in the price index for these groups can be one of the reasons for the higher inflation rate in the tenth decile compared to the first income decile, as these goods have a larger share in the expenditure basket of higher-income households. However, the point-to-point inflation rate for the "food and beverages" group in the Central Bank of Iran's report for November was reported as 59.9%, which, although higher than the inflation rate for this group in October, shows that the rate of increase has slightly moderated. An analysis of the selected commodity basket by Radio Farda in November this year compared to the previous month indicates price increases for eight items and price decreases for two items, with liquid oil recording the highest price increase during this one-month period. The most significant price decrease in this month was for potatoes. However, changing the basis of comparison from October this year to November last year yields entirely different results. All items listed in Radio Farda's selected commodity basket in this year-on-year comparison have experienced relatively severe price increases. The highest price increase among these items was for tomatoes and potatoes, while the lowest price growth from November last year to November this year was experienced by onions. Relative stability in the currency market and a decrease in precautionary demands in this market are among the factors that could help control inflation rates in the coming months. However, controlling inflation rates in the remaining months of the year is not easy. The continuous increase in liquidity, the government's increasing budget deficit, which manifests in the increase of government debts to banks and the Central Bank, and indirectly in the growth of banks' debts to the Central Bank, can potentially continue to stimulate inflation rates to move towards higher figures. Abdolnaser Hemmati, the Governor of the Central Bank of Iran, recently emphasized in a television program that "the government's and Central Bank's policy is to reduce the speed of inflation and then reduce inflation itself." He also stated that controlling liquidity and stabilizing the currency market are among the other programs and priorities of this bank. Listing these programs and priorities is easy in words, but implementing them in a situation where the Iranian economy is experiencing a rather uncertain phase due to external limiting factors, if not "impossible," will certainly be very difficult. In this context, the Statistical Center of Iran announced November inflation as 34.9%. The inflation of the wealthy is more inflated than that of the low-income groups, with an 83% increase in housing prices in Tehran. The inflation index in the first seven months of this year was 20% higher than last year. The increase in inflation to the threshold of 16% coincided with Rouhani's denial of "hyperinflation." Severe government repression and the risk of "underground" protests are also notable. What doctors and eyewitnesses recount about the injured in the protests, the revelation of the limitations of relations between China and Iran amid protests, and the death of the last Mossad representative in Tehran amid the Iranian crisis are also significant.