Taking stock of the negative impact of higher interest rates on the capital market and the economy, the minister of economy in Tehran denied recent reports about the possibility of such a move.
"The governor of the Central Bank of Iran did announce earlier that there is no plan to raise returns on bank deposits…However, there have been talks about a rise in interbank rates, which will be addressed [by the CBI]," Farhad Dejpasand was quoted as saying.
Local media, including Fars News Agency, recently reported that three banks were offering up to 20% interest on deposits. This is while lenders, as per rules of the Money and Credit Council, are allowed to offer 18% interest on term deposits.
The reports have negatively impacted the capital market in recent days. Hassan Qalibaf-Asl, managing director of the Securities and Exchange Organization, has expressed no interest in higher deposit rates on the premise that it would negatively affect investor behavior and by extension the economy.
Late last month the CBI said it has no plan to increase deposit rates. The same was explicitly rejected by the bank's governor, Abdolnasser Hemmati. "Raising deposit rates is unlikely to work in light of supply crunch in the currency market, banks’ unstable balance sheets and the government’s increasing demand for funds. Under the circumstances the CBI would do better to curb inflation by using other tools," he said.
Earlier in the month the CBI said interbank rates had increased steadily over the months after dropping as low as 8% in June. Interbank interest rates have crossed the 22% announced by the regulator as the maximum lending rate.
