Inflation Trends Until the End of the Year; The Core Challenge

Ali Tayebnia, the Minister of Economy in the eleventh government, recently emphasized that inflation has reached its core level, making it harder to reduce the inflation rate from now on. The issue of reaching the core of inflation and the difficulty of reducing this rate under such conditions was previously raised in the last months of the previous year when the inflation rate had stalled just before becoming single-digit. But why has the Minister of Economy mentioned reaching this core? An examination of the inflation rate changes in Azar, the last month of autumn this year, clearly reveals the challenges of this task. The monthly inflation rate in Azar, according to the Central Bank's report, reached 1.4%, the highest monthly inflation rate in the past year and a half. The increase in the monthly inflation rate to figures above one percent not only indicates rising prices over the month but more importantly, it can challenge the maintenance of a single-digit average inflation rate. In the Central Bank's report on inflation changes in Azar this year, the point-to-point inflation rate was announced as 9.2%, which compared to the point-to-point inflation rate of Aban, not only did not continue a downward trend but also showed an increase of 0.1%. This slight increase, at best, can be seen as a stabilization of the point-to-point inflation rate changes and a halt to its decreasing trend. The average inflation rate, or in other words, the 12-month inflation rate ending in Azar this year, reached 8.6%, a rate similar to the previous month's average inflation rate, thus halting the continuous decrease of the average inflation rate this year. In the Iranian Statistical Center's account of the inflation rate in Azar, the monthly inflation rate recorded a growth of 0.8% compared to the previous month's monthly inflation rate, showing an increase of 0.1%. The point-to-point inflation rate for Azar in this report reached 5.7%, which was 0.4% lower than the point-to-point inflation rate of Aban. The Iranian Statistical Center reported the average inflation rate for Azar with a decrease of 0.3% compared to the previous month at 7.2%. One of the most important points to note is the significant and deepening discrepancy between the statistics provided by the two inflation data-producing centers, namely the Central Bank of Iran and the Iranian Statistical Center. However, despite the discrepancy between the two centers regarding the point-to-point inflation rate reaching 3.5%, for the average inflation rate 1.1%, and for the monthly inflation rate 0.6%, both centers emphasize the increase in the monthly inflation rate in Azar. Among the various main groups examined in the Central Bank's report, the highest inflation rate was attributed to the 'Health and Medical' group, which experienced a growth of 17.1%. Following this main group, the price index of the 'Education' group recorded an inflation rate of 11.1%, ranking second in the increase of the price index. In the Iranian Statistical Center's report, during Azar this year, the highest average inflation among the main and sub-groups was attributed to the 'Education' group, with a growth of 13.7%. After the 'Education' group, the average inflation rate of the 'Health and Medical' group with a growth of 9.8% ranked second. Examining the changes in the price index of the 'Food and Beverages' group is significant because price changes in these groups are related to all members of society. Moreover, the importance coefficient of price changes in this group in the calculations of the Iranian Statistical Center has been announced as 25.1%, making it one of the most effective groups in calculating the inflation rate. According to the Iranian Statistical Center's report, the point-to-point inflation of the 'Food and Beverages' group in Azar this year was 7.1%, and the average inflation rate for this group in the same month was reported as 6.9%. The point-to-point inflation rate of the 'Food and Beverages' group in Azar this year was recorded as 9% in the calculations of the Central Bank of Iran. A noteworthy point in the changes in the price index of this group is the monthly inflation of the 'Food and Beverages' group in both the Central Bank and the Iranian Statistical Center's reports for Azar. The monthly inflation of the food and beverages group in the reported month was 2.4% according to the Central Bank and 2% according to the Iranian Statistical Center, which is considered a relatively high monthly inflation rate. Additionally, examining the price changes of a selected basket of goods from Radio Farda, which includes 10 of the most consumed food items in the Iranian household food basket, shows that the average price of this basket increased by about 5% from Aban to Azar this year. The record price increase during this one-month period was for eggs, which saw a price increase of 13%. The price changes of the items listed in this basket during the period from Aban to Azar this year can be seen in Table 1. Changing the base of price comparisons from Aban this year to Azar last year raises the average price growth of this basket to a larger figure, with the average price growth of these items from Azar last year to Azar 95 being slightly less than 9%. The highest price growth among the 10 items in the selected Radio Farda basket was attributed to 'Grade One Domestic Rice', which became over 50% more expensive over the year. During this period, some items in this basket experienced price reductions, with tomatoes recording a price drop of over 43%, the highest decrease. Details of the price changes of these items from Azar last year to Azar 95 are included in Table 2. Table 3 examines the price changes of the selected Radio Farda basket items in two periods, Fall 95 and Fall 95. Accordingly, the average price of this basket in this fall compared to last fall increased by more than 9%. The highest price increase in these two time periods also belonged to Grade One Domestic Rice, which increased by more than 50% during this period. The price changes of other items in this basket during the two periods of Fall 94 and 95 can be seen in Table 3. The developments in the inflation index in the last season of the year and the last three months of this year will be of great interest. On one hand, the repeated record-breaking of the dollar in the free currency market, which has pushed the dollar price into the 4,000-toman range, could affect the changes in the inflation index, and on the other hand, the 30% growth in liquidity along with the increase in government debt to banks and the Central Bank are among the risks of maintaining the inflation rate at current levels. The International Monetary Fund in its latest report has predicted that the average inflation rate at the end of this year will stabilize at 9%, which, although a single-digit inflation rate, stands with the least distance from the double-digit inflation rate. Maintaining a single-digit inflation rate at the end of the current solar year requires recording monthly inflation rates of less than 0.8%. If the monthly inflation rate of Azar, which was 1.4%, is repeated in the remaining months, a double-digit average inflation rate will be recorded in the government of Hassan Rouhani's report at the end of the year. The government and the Central Bank will make every effort in the remaining months of the year to leverage the achievement of reduced inflation rates for electoral advertising in next year's presidential elections, although the disruptive factors of this balance and trend in the Iranian economy are numerous and ongoing.