Central Bank of Iran data show that the monetary base continued to decline in the fourth calendar month to July 22.
The monetary base stood at 6,530.3 trillion rials ($22.5 billion) until that period, up 8.1% in four months since the beginning of fiscal year in March.
The CBI said the growth tamped down as the monetary base expanded by 12.8% in the first four months last year.
It rose 26.2% in the 12 months, down 1.6 percentage points from annualized growth of 27.8% the month before.
The CBI report included data on broad money. Broad money stood at 52,501.4 trillion rials ($181 billion) until the said period -- up 8.6% in four months but 1.3 percentage points lower than the corresponding period last year.
On annualized basis, broad money increased 37.4% as of July 22, which was 2.5 percentage points lower on the annual growth percentage of the first four months last year.
The CBI said transfer of the general ledger of Mehr Eqtesad Bank to Bank Sepah in line with a megamerger explains the 2.5 percentage points of broad money growth in the period.
Rise in broad money due to the merging process “had no monetary and inflationary impact” because it was more related to statistical procedures than real increase in money supply, the regulator said.
Transferring bank ledgers is the final phase of a big bank merger that started in early 2019. It involved Bank Sepah, the oldest in Iran and one of the three still under government ownership, four banks and one credit institution owned by the Iranian armed forces, namely Ansar Bank, Bank Hekamat Iranian, Mehr Eqtesad Bank, Ghavamin Bank and Kosar Credit Institution.
The CBI says it has managed to control monetary factors by pushing for stricter financial discipline by banks and mitigating the impact of fiscal discipline, which is mainly related to how the government handles budget deficits.
Recent CBI measures include stringent credit policies, namely tighter restrictions on bank balance sheets, especially those of distressed banks.
Senior economic officials say decline in the monetary base was partly due to the government limiting borrowing from the CBI in the form of discretionary spending in the first few months of fiscal 2022-23.
Bond Yields and Interbank Rates
On developments in the interbank market, the central bank said interbank rates rose slightly in the month to July 22 but did not go beyond policy rates set by the regulator.
The CBI said rise in interbank rates in that month was due to excess of liquidity in the market in the follow-up to the government decision to end forex subsidies for import and instead pay cash to the needy.
Struggling to avoid steep declines in interbank rates due to excess supply of funds, the CBI reduced supply of overnight credit to lenders causing interbank rates to rise.
According to the CBI report, bond yield for government treasury bills experienced subtle and insignificant increase in the mentioned month.
Yields for one and three-year maturity bonds saw monthly rise of 0.02 to 0.06% to reach 21.67% and 22.94%, respectively. However, two-year bonds rose 0.3% on the month before to reach 22.72%.
