Central Bank Official: Inflation Rate Will Reach 25% This Year

While the Research Center of the Iranian Parliament has mentioned a 2% increase in inflation following a 10% rise in currency prices, the Deputy of the Central Bank's Research Institute announced that due to the increase in currency prices, inflation will reach 25% this year and 20% next year. According to a recent report from the Research Center of the Parliament, for every 10% increase in currency prices, inflation will rise by 2%. The Producer Price Index in the Iranian economy is expected to increase by 1%. Since Farvardin (March-April) of this year, currency prices have risen by more than 100%, which calculates to a 20% increase in the inflation rate. Meanwhile, according to the newspaper Shargh, Hamid Zamanzadeh, Deputy of the Central Bank's Research Institute, identified the main factor for the recent inflation rate increase as the rise in currency prices, adding that 'the effects of the currency rate increase will manifest in inflation within two to three months.' He predicted that inflation would reach 25% this year and 20% next year. Zamanzadeh also stated that if the negotiations with Europe regarding the JCPOA yield results, the currency market conditions would improve and inflation would decrease. He predicted that if oil sanctions are implemented and Iran's oil sales drop to 200,000 barrels, inflation could reach about 30% in 1998 (2019). However, Ayoub Farahmandzadeh, the research deputy of the Statistical Center, predicted that inflation would reach 15% this year and 20% next year. The Central Bank of the Islamic Republic announced on the fourth of Mordad (July 25) that the inflation rate in Iran for Tir (June-July) this year was 10.2%. Nevertheless, Fereydoun Khavand, an economist, noted on the sixth of Mordad in a commentary on Radio Farda that the 'point-to-point inflation' rate of 18% this month indicates that the Iranian economy is 'entangled in severe inflationary tensions, and if the current situation continues, a real storm in prices is on the horizon.' He also mentioned that the 'month-to-month inflation' has reached 3% and 4% in recent months, while any increase above 0.8% is considered a red line for controlling inflation. Following recent currency fluctuations in Iran, some media outlets have warned of the risk of Iran becoming 'Venezuelanized.' The International Monetary Fund announced on July 24 that Venezuela's inflation rate is expected to reach one million percent this year. Meanwhile, Steve Hanke, an American economist from Johns Hopkins University, estimated the current inflation rate in the Iranian economy to be as high as 117%, which is 10 to 12 times higher than the officially announced rate. The significant discrepancy in assessing Iran's inflation rate in this economist's calculations is due to the use of the free and unofficial market exchange rate (dollar) in his calculations. Hanke believes that the official dollar rate is a 'manipulated' and 'unrealistic' rate and cannot serve as a basis for calculating inflation rates.