Friday, January 13, 2012

Iran Central Bank Reportedly Raises Interest Rates

The Central Bank of the Islamic Republic of Iran is reported to have decided to raise interest rates to stabilize its gold and currency markets.  Bloomberg cited IRNA quote from Kazem Delkhosh (and central bank official) "The council has decided to fix the rates for bank deposits at a rate higher than inflation".  Meanwhile financial blog Zero Hedge reported that Iran's central bank had raised rates to 20%, citing EA World View: "The effort is to reduce the flow of cash in the economy, but the official says it will increase capital investment by banks in an "impressive market"."  According to Bloomberg Iran's inflation rate is currently 20.6% (compared to a reading of 12.5% in the year ending March 2011).

While Iran's central bank does not display official interest rates on its website, it periodically issues decrees on interest rates, for example when it ordered banks' interest rates of 26-28% to be reduced to 14-17% in April last year.  Early this year US President, Barack Obama, signed into law a set of sanctions against the Iranian central bank, as a means of isolating the Iranian regime in response to allegations that Iran is seeking to develop nuclear weapons.  The Iranian Rial (IRR) last traded around 11,250, placing it down about 9% against the US dollar over the past year, with much of the weakness coming in recent months.


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