Continuation of decrease in liquidity growth in May this year

According to the economic correspondent of Fars News Agency, in line with the implementation of its monetary policy approach based on managing inflation expectations, the central bank has put on its agenda the provision of accurate and timely information on the set of macroeconomic developments and actions of the central bank.

This action will lead to the correct formation of expectations among economic actors, and the central bank will also pursue its goals of maintaining the value of the national currency (inflation control) and contributing to economic growth in better conditions.

Based on this, a summary of macroeconomic developments and actions of the central bank in order to achieve these goals and missions in May 1401 according to the announcement of the central bank is presented as follows.

1- Macroeconomic developments

The analysis of the inflation rate of consumer goods and services price index in May 1401 shows that although the twelve-month inflation continued its downward trend that started in October 1400 and was accompanied by a relative decrease at this point, point by point and monthly inflation Due to the implementation of the policy of eliminating preferential currency allocation, some basic goods increased compared to the previous month. The review of the monthly inflation of the price index of consumer goods and services by the specific groups of “goods and services” in May shows that the goods experienced a higher monthly inflation than the service items.

In this connection, the monthly inflation of the special goods group reached 6.1 percent with an increase of 3.3 percentage points compared to last month in May of this year. In the meantime, the price index of food and beverages (with an importance factor of 25.5%) affected by the implementation of the policy of removing preferential currency allocation and inflationary expectations resulting from this measure, increased by 4.4 percentage points compared to last month and registered a monthly inflation of 7.9%, with a share of Equivalent to 2.6 percentage points, it accounted for the largest share of the total index’s monthly inflation (5.1 percent) in May of this year. In line with the increase in the inflation of the goods group, the monthly inflation of the service group also reached 3.5 percent with an increase of 2.4 percentage points compared to the previous month with a significant factor (51.5 percent).

In the field of foreign trade, according to the preliminary report published by the Iranian Customs, during the first two months of 1401, the value of customs exports was about 8.5 billion dollars, which indicates an increase of 37.0% compared to the same period of 1400. Also, the value of customs imports in this period was reported to be about 8.1 billion dollars, which indicates an increase of about 24.3% compared to the same period last year. In total, affected by these developments, during the first two months of this year, the customs trade balance had a surplus of 401 million dollars.

The developments of the foreign exchange market (NIMA system and the integrated market of Iran’s foreign exchange transactions) in May indicate that in this month, the average monthly sales rate of dollars in the remittance and banknote market has increased compared to the previous month. In the month of May, the average sale rate of remittance dollars and bills included in the Senate system was about 249.7 and 256.6 thousand rials, respectively, which show an increase of 2.2 and 1.4 percent, respectively, compared to the month of April.

In the housing market and based on the information obtained from the country’s real estate transaction registration system, the average purchase and sale price of one square meter of residential unit infrastructure traded in Tehran during May 1401 was 6.1 percent compared to the previous month and compared to the same month last year. also experienced a 26.2 percent increase.

Although this value is much lower compared to the point-to-point growth of May 1400 (equivalent to 69.7 percent) and shows the slowing down of the capital’s housing price growth in 1401, but the monthly growth of the aforementioned variable in May compared to April 1401 (decrease) 2.4 percent compared to the previous month) has increased.

In the stock market, the total index of the stock exchange increased by 4.5% on the last day of May compared to the last day of the previous month. It should be noted that the monetary policy maker will, if necessary, put appropriate policy measures on the agenda by continuously monitoring asset price changes and paying attention to its implications on the change in the level of inflationary expectations.

Regarding the developments in the interbank market in May, it should be noted that since the beginning of this year, due to the decrease in banks’ liquidity needs compared to the last months of the previous year, as well as the lack of government auctions and the deposit of subsidies related to the popularization of subsidies, funds available in the market Interbank increased. As a result of this incident, the central bank gradually reduced the volume of open market operations (repo) in May in order to maintain the interest rate of the interbank market within the predetermined policy limits. This caused the interbank market rate to experience a slight increase in May.

As mentioned, although in May 1401, new government Islamic financial bonds were not offered by the government in the primary market, but due to the gradual decrease in the volume of open market operations and the subsequent mild increase in the interest rate of the Riyal interbank market, as well as the increase in inflationary expectations. As a result of the implementation of price adjustment policies by the government, the yield rates of government Islamic financial bonds this month started a mild upward trend compared to April. In this month, the average monthly yield rate of the mentioned documents with one, two and three-year maturities reached 22.02, 22.69 and 23.03 percent, respectively, with an increase of 0.25, 0.06 and 0.14 percentage points compared to the previous month.

In April 1401, with the reduction of yield rates compared to March 1400, the yield curve of Islamic treasury bonds was at lower levels than the yield curve of Islamic treasury bonds of March 1400. But in April 1401, with the increase of yield rates, the yield curve of this month has gone up slightly compared to the yield curve of April 1401.

The volume of liquidity at the end of May 1401 (equivalent to 49,434.7 thousand billion rials) compared to the end of 1400 increased by 2.3%, which shows a decrease of 1.3 percentage points compared to the growth of the mentioned variable in the same period of the previous year (3.6%). Also, the twelve-month growth rate of liquidity in May 1401 was equal to 37.3%.

It is necessary to explain that about 2.6 percentage points of liquidity growth in the twelve months ending May 1401 related to the addition of the summary information of the general ledger of assets and liabilities of Mehr Economy Bank to the summary information of the general ledger of assets and liabilities of Sepeh Bank (due to the merger of banks belonging to the forces armed in Sepeh Bank) and has no monetary effects. In other words, if the effects of the aforementioned statistical coverage are adjusted, the liquidity growth at the end of May 1401 compared to the end of May 1400 will be equal to 34.7%.

The monetary base growth reached 30.5% in the twelve months ending May 1400. It should be noted that the monetary base at the end of May 1401 (equivalent to 6432.1 thousand billion rials) compared to the end of 1400 had a growth of 6.5 percent, which compared to the growth of the aforementioned variable in the same period of the previous year (7.4 percent) by 0.9 percentage points. Dropped.

2- Actions of the central bank

In May 1400, with the aim of managing the liquidity of the Riyal interbank market, the Central Bank, in interaction with the banks, carried out the following credit measures:

A) Conducting open market operations during four auctions with a value of 899.3, 899.6, 871.0, and 838.5 thousand billion Rials, respectively, with a total transaction value of 3508.4 thousand billion Rials in the form of a repurchase agreement with maturities of 6, 7, and 8 days (the remainder of the repurchase agreement from Open market operations at the end of May was equal to 838.5 thousand billion rials, which has decreased by 106.5 thousand billion rials compared to the figure at the end of 1400 (945.0 thousand billion rials).

b) Banks’ use of systematic crediting at the ceiling rate to meet liquidity needs in 9 days with a total transaction value of 77.0 thousand billion Rials (the balance of systematic crediting at the end of May was zero).

c) The brokerage of this bank has not held an auction of Islamic financial bonds since the beginning of this year until the end of May.

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