Stop of the Decreasing Trend of Inflation Rate After 20 Months

The decreasing trend of the inflation rate has stopped after 20 consecutive months of decline in Ordibehesht 1394 (May 2015). This halt can be observed in the Central Bank's report on inflation changes for Ordibehesht this year, which shows that the average 12-month inflation rate remained stable at 15.5%, unchanged from the 12-month inflation rate ending in Farvardin 1394 (April 2015). According to Central Bank reports, the inflation rate began its downward trend from 40.4% in Mehr 1392 (October 2013) and decreased by about 25 percentage points to 15.5% in Farvardin this year, but this downward trend did not continue in Ordibehesht, and the inflation rate remained at this figure. Previously, when the inflation rate passed the 20% mark and entered below the 20% fluctuation channel, many experts and analysts spoke of the government's difficulties in maintaining the declining trend of the inflation rate, using the term 'core inflation' to describe the situation. Now it seems that this term reveals the hidden reality of the government's challenges in controlling and reducing inflation acceleration. According to the Central Bank's report on inflation changes in Ordibehesht this year, the point-to-point inflation rate in Ordibehesht 1394 was 16.2%, compared to 16.5% in Farvardin 1394. Meanwhile, the Central Bank announced the monthly inflation rate for Ordibehesht 1394 as 1%, which, although 0.3% lower than the monthly inflation rate of Farvardin, indicates that for the economic policymakers of the 11th government, the fluctuation of the monthly inflation rate around 1% and slightly above it means an annual inflation rate of less than 13%, which is only slightly different from the promise of achieving a single-digit annual inflation rate. To achieve an annual inflation rate of less than 10%, the monthly inflation rate must fluctuate below 1%. According to the Central Bank's report on the Consumer Price Index in Ordibehesht, the price index for the main group of food and beverages experienced a growth of about 21% (20.8%) compared to the same month last year. The price index for this important group, which affects the general price level, experienced a 1.6% increase from the previous month to Ordibehesht 1394. However, an examination of the price changes of a selected basket of goods by Radio Farda, which includes 10 commonly consumed items by Iranian households, shows that the average price of these goods decreased by slightly more than 1% (1.18%) during the first two months of this year. The largest decrease was related to eggs, where the price of a 30-egg carton in Ordibehesht this year decreased by more than 10% compared to the previous month. The largest price increase was for tomatoes, which saw a price increase of about 24% during this two-month period. Price changes for other items in the selected basket of Radio Farda can be seen in Table 1. The price changes of items in the selected basket of Radio Farda during the period of Ordibehesht 1394 compared to Ordibehesht 1393 also show that the trend of decreasing these 10 items has averaged a 4% decrease in this comparison. The largest price decrease was for potatoes, which experienced a price drop of 37% from Ordibehesht 1393 to Ordibehesht this year. The largest price increase was for high-quality domestic rice, which became more than 8% more expensive for consumers from Ordibehesht last year to Ordibehesht 1394. In Table 2, the price changes of the selected basket of Radio Farda in Ordibehesht this year compared to the same month last year can be observed. In the Central Bank's report on price index changes for main groups, the healthcare group recorded the highest price increase, experiencing a growth of more than twice the average inflation rate compared to the same month last year, with the price index for this group increasing by 33.5% in Ordibehesht compared to the same month last year. The halt in the decreasing inflation rate mentioned in the Central Bank's report on price changes in the second month of 1394 may face further challenges with the removal of gasoline rationing and the unification of gasoline prices, which will have a psychological effect on the price changes of other goods and services. Moreover, in recent months, some economic experts, including Hossein Raghfar, a faculty member at Alzahra University, have attributed the relative decrease in the inflation rate in recent months to the prevailing recession in the Iranian economy. The Central Bank recently reported that the growth rate of liquidity in 1393 was 22.3%. Although this liquidity growth rate is considered high, the Central Bank describes achieving this figure as a success in controlling this inflationary factor in the Iranian economy, which, according to the Central Bank's statement writer, is even lower than the bank's target range for liquidity growth of 23% to 25% in 1393. While the decrease in the inflation rate has stopped in Ordibehesht, Farhad Neyli, the head of the Monetary and Banking Research Institute of the Central Bank, stated in an interview that the main challenge of the 25th annual conference on monetary and exchange policies is to achieve 'single-digit' and 'sustainable' inflation.