AFP: Iran’s central bank said money supply, a key indicator of future inflation trends, grew by 39.4 percent in the past Iranian year which ended March 2007, newspapers reported on Wednesday. TEHRAN, May 23, 2007 (AFP) – Iran’s central bank said money supply, a key indicator of future inflation trends, grew by 39.4 percent in the past Iranian year which ended March 2007, newspapers reported on Wednesday.
Central bank head Ebrahim Sheibani put Iran’s money supply at 1,284 trillion rials (138 billion dollars) last year — showing an increase of 39.4 percent over the same period from the year earlier, the Ham Mihan newspaper reported.
Money supply growth was 36.8 percent in the year to 2006 and 29 percent in the year to 2005.
The huge increase in money supply is set to add to concern over prices in the Islamic republic which have surged in recent weeks, especially for basic foodstuffs and services, hitting the poor hardest.
The central bank has predicted that inflation will rise to 17 percent in the current year to March 2008, a 3.5 percentage point rise from the previous year, although many economists expect the number to be even higher.
Economists and some MPs have repeatedly warned that the expansionist policies and high spending of the government of President Mahmoud Ahmadinejad risk fueling inflation.
An additional inflationary factor could come from the hike imposed on Tuesday on petrol prices, which went up by 25 percent as the government seeks to limit the state subsidies paid for Iran’s frenzied petrol consumption.
However in apparent defiance of the double digit-inflation, the government on Tuesday slashed interest rates to 12 percent from 14 percent for state banks and rates at private banks to 12 percent from 17 percent.
The cut, the second since Ahmadinejad was elected to office in June 2005, was criticised in the moderate press which noted that the move flatly contradicted comments by the economy minister made just hours earlier.