The Central Bank of Iran needs to concoct intermediate policies to be able to adjust to negative supply shocks and control monetary supply, the bank’s governor said.
Speaking on state TV late Monday, Abdolnasser Hemmati reflected on reasons why the regulator refused to adopt contractionary monetary policy and increase interest rates to control inflation.
Contractionary monetary policy is driven by increase in base interest rates controlled by central banks or other means producing growth in the money supply. The goal is to reduce inflation by limiting the amount of active money circulating in the economy.
The senior banker said any monetary policy to curb inflation must include controlling money supply plus measures to cope with supply shocks that push up prices.
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