Economy, Business And Markets

High Interest Rates Threaten Economy

High Interest Rates Threaten EconomyHigh Interest Rates Threaten Economy

The deputy minister of economy, Mohammad Parizi, on Wednesday criticized the deposit rates as very high, warning that the economy “will collapse” if the rates are not cut, IRNA reported.

During a ceremony in Tehran to welcome the new CEO of Bank Mellat, Parizi said, “The deposit rates being offered in the unregulated money market (credit institutions and cooperatives) is currently plaguing the economy.”

His comments came a day after the Central Bank of Iran Governor, Valiollah Seif, said the gap between the deposit rate ceiling and the inflation rate is a matter of serious concern. “Deposit rates need to be set in line with inflation, which is hovering above 15 percent now,” he said.

Some institutions still offer higher deposit rates than those agreed with monetary officials, which is maximum 22 percent on one-year deposits.

Seif warned commercial banks to align themselves with central bank interest rate policy or face a disciplinary action.

Parizi said if interest rates do not follow the downward trend of inflation, expenses for providing financial services will increase and therefore “the domestic economy will collapse.”