Tehran, Dec 30, IRNA — Creating stability in banking and monetary policy is the key goal of the Central Bank of Iran (CBI) governor as he seeks to make the economy more predictable.
Following these remarks the governor called the drop in inflation, ‘the administration’s greatest achievement so far,’ adding that the central bank is closely monitoring the inflation rate.
Headline inflation has come down from over 45 percent last year and is expected to fall below 20 percent for the current fiscal year ending March 20, 2015.
Seif, who spoke at the fourth conference on monetary policy, banking and manufacturing challenges – hosted by the Financial Tribune’s sister firm, Donya-e-Eghtesad newspaper – said that regrettably, monthly inflation, the forbearer of headline inflation, has changed direction and has been rising over the past few months.
Year-on-year inflation for the month ending Dec. 21 rose 160 basis points to 16.7 percent from 15.1 percent in the prior month. Inflation y-o-y had reached a record low of 14.4 percent for the month ending Sept. 22.
But Seif said that the CBI ‘will control money supply’ and seek to direct it towards the manufacturing sector. Money supply rose 12.7 percent during the first eight months of the current fiscal year (starting March 21, 2014). This shows a slowdown in money supply increase compared with the same period last year. The figure stood at 15.2 percent in the first eight months of last year.
“We cannot call our current policy a contractionary one, as the money multiplier rose 4.5 percent, leading to an actual rise in money supply, although monetary base slipped 1.6 percent during this period,” said the governor.
The rise in inflation expectations is partly owed to the increase in money supply as the central bank bought $4.1 billion from the government at the end of the previous fiscal year. The purchase raised money supply but also helped bring the economy out of recession, Seif said, according to financialtrrribunedaily.com.
Seif reaffirmed the government rhetoric on the parliament’s allegations of the withdrawal of $4.1 billion from the National Development Fund of Iran (NDFI) by the government. The sum originated from oil revenues, and when it was transferred to the CBI, “we gave 26 percent of it to the NDFI, 14 percent was given to the National Iranian Oil Company and the rest was given to the government.”
The governor defended his organization’s conduct on financial and economic data saying that he had personally investigated the bank’s conduct during the previous administration. Seif slammed people who allege that the central bank is fiddling with economic data.
“Not a single wrong piece of information has been announced by the central bank,” said the official, “in the worst circumstances the bank halted its data dissemination.”
Seif also added that the CBI’s data gathering has improved significantly. “Before this, only 30 to 40 percent of our banking data was verifiable. Now, the data’s verifiability is over 90 percent.”
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