The Alarm of Inflation Has Sounded

Reports from the Statistical Center of Iran and the Central Bank indicate that the average inflation rate in the month of Ordibehesht this year has remained in the single digits, although this situation is very fragile. According to the Statistical Center of Iran, the annual inflation rate for the twelve months ending in Ordibehesht this year reached 8 percent, which is one-tenth of a percentage point lower than the previous month. The Central Bank of Iran also reported that the average inflation rate in urban areas of Iran in Ordibehesht was 9.1 percent, which is also one-tenth of a percentage point lower than the same rate in the previous month. However, what makes the maintenance of the inflation rate within the single digits fragile are the monthly and point-to-point inflation rates in these statistical reports. Based on the report from the Statistical Center of Iran, the monthly inflation rate in Ordibehesht reached 1.1 percent, and the persistence of the monthly inflation rate above one percent threatens the achievement of single-digit inflation, especially since the point-to-point inflation rate in Ordibehesht was assessed at 8.3 percent. A look at the Central Bank's report on the consumer price index in urban areas of Iran in Ordibehesht this year also shows that the monthly inflation rate for this month, which indicates an increase in the inflation rate from the previous month, was 1.6 percent, which is considered high. In this report from the Central Bank, the point-to-point inflation rate, which means comparing the inflation rate for two periods in Ordibehesht this year to the same month last year, was assessed at 9.7 percent. This figure could potentially push the average inflation rate in the coming months above 10 percent. Expensive food and beverages, more expensive education. Examining the changes in the price index of various goods and services in the two statistical reports from the Central Bank and the Statistical Center of Iran can indicate which group of goods or services has caused inflation in these months. According to the report from the Statistical Center of Iran, in Ordibehesht this year, the highest increase in the price index among different groups of goods and services for urban households was attributed to the 'Education' group, which experienced an average inflation rate of 11.3 percent. Based on the findings of the report from the Statistical Center of Iran, urban households in the second month of this year, after the 'Education' group, experienced the highest inflation in the 'Food and Beverages' group, which had an average inflation rate of 10.8 percent. It is noteworthy that for calculating the inflation rate for urban households, changes in the inflation of the food and beverages group have a weight of 24.5 percent, which is high, meaning that price changes in this group of goods have significant effects on the inflation rate. The report from the Central Bank regarding inflation changes in Ordibehesht this year has similar results to the report from the Statistical Center of Iran, indicating that the highest inflation rate, recorded at 12 percent growth, was related to the education group, followed by the food and beverages group with an 11.4 percent increase. The weight of the food and beverages group in the inflation calculations for the Central Bank is also in the second position in terms of importance and impact on the inflation rate, after the 'Housing' group. Furthermore, changes in the price index of the food and beverages group more significantly affect the expenditure basket of low-income groups and impact their quality of life. The chart above shows the changes in the inflation rate of the food and beverages group in two periods of the years 1395 and 1396. As indicated in this chart, the price index for this group significantly increased from Bahman 1395 and continuously grew at rates above ten percent for 13 months until Bahman 1396. Given the weight of this group in inflation calculations, it can be concluded that this continuous and high growth of the price index for the 'Food and Beverages' group in recent months has affected the quality of life and expenditure baskets of low-income families. The selected goods basket of Radio Farda also did not experience significant changes in Ordibehesht 97 compared to the previous month, and the average price changes in this basket remained almost stable over two consecutive months. However, among these food items, the price of tomatoes decreased by 9 percent, while the highest price increase was experienced by a tray of 30 eggs, which saw a 6 percent increase in price over these two months. When changing the comparison basis from Farvardin to Ordibehesht last year, the average price of this goods basket witnessed a 3.5 percent increase. The highest price increase in Ordibehesht this year compared to the same month last year was recorded for eggs, with an increase of over 61 percent, while the most significant price decrease during these two periods among the items listed in the selected goods basket of Radio Farda was for tomatoes, which became over 45 percent cheaper. A noteworthy point in this context is the expectation arising from the disruption in the currency market affecting the prices of other goods and services. It seems that the impact of this disorder in the currency market did not reflect in the inflation rate for Ordibehesht, and this effect should be tracked in the inflation rates for the coming months. Other price changes that could affect the inflation rate and the general price level include the impact of rising housing and rental prices. The weight of changes in the housing and rental price index for urban households is very high, and this group is considered the most important and influential group of goods in calculating the inflation rate. On the other hand, the Central Bank's report on the developments in the housing market in the capital during Ordibehesht shows that the average price of one square meter of residential space traded in the second month of this year increased by more than 8 percent compared to the previous month and about 35 percent compared to Ordibehesht last year, reaching 5 million and 980 thousand tomans. Additionally, based on the findings of this report, the housing rental index in the reported month increased by 11 percent compared to Farvardin this year and about 10 percent compared to Ordibehesht last year, which could also impact the general price level of goods and services for urban households. The sum of these developments raises concerns about the inflation rate moving to higher numbers in the coming months, which is not desirable for policymakers.