Ex-CBI Chief Contemplates on Inflation Control Initiatives

The prices of essential Contemplates goods increased sharply when the subsidized import policy was repealed in May 2022. As a result, high rates of monthly and year-on-year inflation were registered in June and July 2022. Other factors also contributed to inflation, leading to the second peak of YOY inflation in a year; in March 2023, the inflation stood at 64%. Abdolnaser Hemmati, the former head of the Central Bank of Iran, prefaced his write-up for the Persian daily Donya-e-Eqtesad with this note. A translation of the text follows:
First, higher money printing, especially in the second half of the fiscal 2022-23, can intensify the growth of liquidity and inflationary expectations. The monetary base is estimated to stand at 2,200 trillion rials [$4.4 billion], registering an increase of 36% by March 2023. That’s a very high increase in terms of the annual growth rate of money amid inflationary expectations. Thanks to the continuation of the restriction imposed on the banks’ balance sheets, which became operational and gradually stabilized in 2020-21, as well as the increase in the legal deposit of some banks at the end of 2022-23, the acceleration of liquidity growth decreased but this does not mean that the growth of monetary base will not have an impact on the economy and inflation.