Economy, Business And Markets

Interest Rates Compatible With Inflation

Interest Rates Compatible With InflationInterest Rates Compatible With Inflation

The current interest rates offered by banks are more or less “adjusted with the inflation rate” and ensure the interest of depositors, a banking official said, Bourse Press website reported.

However, “Adjusting banking interest rates alone is not enough to augment domestic production. Productivity should also improve in conjunction,” Ahmad Shafeezadeh, managing director of Day Bank said.  

The bank interest rates should be well adjusted to the inflation rate because lower rates harm the value of peoples’ deposits, not to mention that under the conditions people tend to move their money to safer havens like buying gold, real estate and hard currency.

Meanwhile, manufacturers across the globe hunt for cheap loans but they also should reduce the price of their products, Shafeezadeh said, without explaining how cost prices could be cut in the atmosphere of galloping inflation and recession that has posed major challenges to the Iranian manufacturers for years.

“Expectations of both depositors and borrowers should be realistic,” the banker was quoted as saying.

At the moment, the deposit rates offered by banks and lending institutions are 3 to 5% above inflation “which is logical.”

He noted that the banking system has genuinely cooperated with the Central Bank of Iran to implement the interest rates as approved by Money and Credit Council. However, certain uncertified institutions have failed to do so.

Shafeezadeh hailed efforts by the central bank to regulate the unorganized monetary market of the country. “The CBI has managed to address the needs of the monetary market and push uncertified institutions into the process of certification.”