Monthly Inflation Rate Alarming

The director of Monetary and Banking Research Institute declared that Central Bank must handle expectations regarding the inflation with tact and finesse and that the government must remain committed to minimizing the inflation rate to as low as 1.5 percent. Farhad Nili stressed that studying the trends of inflation over the past few months helps a lot with implementing proper control measures and said: "The previous Iranian administration constantly reached Central Bank's resources irresponsibly and without any restriction to compensate the budget deficit and repeatedly committed a financial violation. The previous government had gone so far as to establish this violation as a regular act." Nili continued: "As of October 2013, the new administration blocked the access to Central Bank's resources. This is probably an unprecedented occasion in the history of the country to see an Iranian administration blocking its own access to state resources and trying hard to implement financial policies as effectively as possible. Devotion to moderation and red lines over the course of the past year has been the key to controlling the inflation. Moreover, it's important for the government not to make promises to the public that cannot realistically hold on to." The director of Monetary and Banking Research Institute counted stagnation as another impeding hindrance against economic growth and the decline of inflation. "Central Bank persuaded people to forget the past and faithfully look forward to a more promising future in line with the declining trend of inflation. Only a year ago, the inflation was rapidly increasing, but the trend has seen a downward trend over the past few months. As long as previous mistakes and incidents are taken into account for making decisions, inflation will rise." Elaborating on Central Bank's finesse on managing the inflation, he added: "Central Bank must be able to keep expectations reasonable and ceaselessly commit to controlling the inflation. Central Bank cannot simply give up its efforts once the inflation is heated. By adhering to effective policies, reducing inflation to below 10 percent by the end of 2014 will be a real possibility."

More Expensive Energy Carriers Different from Inflation
Speaking of a 50-percent price shock on energy carriers, Nili said: "The increase in the prices of energy carriers does not stand equal to inflation. Therefore, if monetary base is not boosted appropriately, inflation will be inevitable. It's not to mention that monetary base has been a strict deadline for the government.
Nili went on to say: "The effects of increase in the prices of energy carriers haven't become visible yet. In spite of that, the monthly inflation of 1.2 percent that kicked in last April along with the implementation of the second phase of Subsidies Plan is a negative indication for near future." Mentioning a possible increase in the inflation rate over the month of May, Nili said: "Should the government remain committed to curbing the inflation, the average rate of the country's inflation will be effectively controlled and won't reach an alarming level."
The director of Monetary and Banking Research Institute concluded: "Monthly inflation should never exceed 1.5 percent under any circumstances. If the present situation prevails, we might face a massive 20-percent inflation rate by the end of the year, and if the monthly inflation rate ever exceeded 1.5 percent, the government should be alarmed and take proper measures to regain control."