The most recent inflation rates posted by the Central Bank on its website gives a rate of 15.8 percent compared to the same month a year ago and 12.4 percent calculated as the average of the last 12 months.
But Central Bank Governor Mahmud Bahmani told banks to “slash their lending rates to 14 to 17 percent from 26 to 28 percent,” the state news agency reported Tuesday.
The Central Bank also decreased the interest rate for long-term savings to 15 percent from 17 percent.
While the new rates are about the same level as the official inflation rate, most economists believe Iran’s true inflation is substantially higher than the published rates, more on the order of 20 percent.
The new rates apply to both state-owned and private banks. Banks were private before the revolution but nationalized in 1979. In 2001, private banks were allowed again, but they have only a small share of the banking business.
Bahmani said, “The aim of the decrease in interest rates is to help output and industry in order to decrease the final prices of products and to control and manage imports.”
But critics of the regime’s economic policies said the intent was to extend state control of the economy.
President Ahmadi-nejad has long been a proponent of low interest rates as a way to help the poor and boost economic activity.
But critics say interest rates below the rate of inflation encourage everyone to borrow whatever they can and then pay the loans back in inflated rials, thereby profiting off the banks. Low interest rates also discourage the public from making deposits and encourage them to send their cash abroad.
The Association of Private Banks has written Bahmani objecting to the new rates. “We are not comparable to governmental banks, we should determine these rates ourselves,” the head of one private bank told Reuters.
