A member of the Money and Credit Council said to overcome economic challenges, lowering interest rates would be inevitable. Mohammad Reza Pourebrahimi whose council is the main monetary policymaker added that MCC members are determined to approve further rate cuts. He criticized banks for failing to implement rates set by the body.
Pourebrahimi who also serves on the Majlis Economic Commission said the Central Bank of Iran has promised to deliver to the council a comprehensive report on the current rates and prospects of further cuts. However, he criticized the CBI for putting off the decision saying it had slowed down the decision-making process of the regulating body.
The council in mid-November had required the central bank to present a report on the probable consequences of further rate cuts. The CBI-affiliated MCC cut interest rates once in April by two percentage points, bringing deposit rates to 20%.
“The report will help MCC members to design a strategy to lower the rates in a gradual manner. In order for the cut(s) to materialize, the CBI should monitor the banks closely,” the news website banker.ir quoted him as saying.
MCC members are unanimous in supporting further rate cuts but differ in their approach to implement the scheme, according to Pourebrahimi. He also stressed the importance of attention to the parallel investment markets at the same time that the rates are reduced. “If we can convince the people to move their money to other investment markets we can be successful in our plans.”
The lawmaker opined that the current 20% deposit rates have a direct effect on banks’ lending rates which are at or near 24%. “A major part of the extended woes of manufactures is due to the credit crunch caused by the exorbitant lending rates of banks. The issue must be settled to enable the economy get back on its feet.”
