Forecasting the continuation of the downward trend of indicators affecting inflation

According to Iran Economista look at the set of actions of the central bank to curb inflation growth shows the management of liquidity growth with the aim of curbing inflation, regulating and managing the currency market, strengthening supervision and reforming the banking system, strengthening the governance of the Rial, regulating financial relations between the central bank and the banking network with the government, Strengthening currency and monetary diplomacy and strengthening relations with neighbors and, of course, releasing blocked resources are the main headlines of the central bank’s actions in the form of stabilization policies.

Inflation control

In order to curb inflation, the central bank formulated a set of policies and measures in various fields to identify and control the factors affecting inflation, followed up and acted upon, and controlling the growth of liquidity is only one of these measures.

In this regard, the necessary solutions in areas such as balancing the government budget and reducing the budget deficit with the simultaneous management of expenses and income, reforming the banking system and reducing the imbalance of banks, managing inflationary expectations and strengthening the production and supply of goods and services in the country are of interest and attention. The government was placed.

Inflation changes this year based on Central Bank’s calculations from the index of the total price of consumer goods and services in urban areas show that the inflation rate (12 months) at the time of the beginning of the 13th government had reached 59.3% in September 1400 and following The set of measures taken by the 13th government and the central bank has taken a decreasing trend and this positive trend can be seen in the decrease of 16.3 percentage points of inflation from April to November this year.

At the beginning of the government’s work, i.e. in October 1400, the growth of liquidity was 42.8%, this number reached 26.2% in November 1402, that is, in a period of nearly 2 years, and decreased by 16.6 percentage points. is considered a good record in the field of liquidity control and we have seen its inflationary effect so far and it will definitely have effective and positive effects from now on. This can be seen in the decrease of 16.3 percentage points of inflation this year from April to November.

Of course, it should be noted that in the beginning of 1401, due to the requirement to implement the popularization plan and the fair distribution of subsidies, as well as the increase in the global price of basic goods, there were significant and expected increases in the price index of consumer goods and services, mainly due to the high growth of the food and beverage group index. As a rule, such fluctuations cannot be classified as structural factors of inflation and analyzed from this point of view.

Cash control

According to most experts, the root of inflation is the increase in the growth of liquidity and money creation, which was always on the path of growth in the 90s. So that the volume of liquidity in August 1392, at the same time as the 11th government began, was equal to 640 thousand billion tomans, and at the end of Shahrivar 1400 (the end of the 12th government), this figure reached four thousand 68 thousand billion tomans. The volume of the monetary base also reached from 96.3 thousand billion tomans in August 1392 to 519 thousand billion tomans at the end of September 1400, which had noticeable effects on the increase in inflation during the past years. As a result of the implementation of the stabilization policy, the liquidity growth rate reached 26.2% from 42.8% in Mehr 1400. This positive trend can be seen in the decrease of 16.3 percentage points in inflation from April to November of this year, and the inflation reached 46.1%. It has arrived in November.

There is a high probability of achieving the 25% target for liquidity growth on the one hand, as well as a decrease in the growth of the monetary base, whose growth was equal to 45% at the beginning of this year, and this number has reached 38.5% in November. The growth of the monetary base and liquidity will reach a correlation in the medium term, and with the convergence of these two variables, the downward trend of inflation will continue until the end of the year.

Also, in order to reform the banking system, the program to control the growth of the balance sheets of banks and credit institutions and to fine the banks that violate the limits by increasing the legal deposit ratio as last year was seriously put on the agenda of the central bank, and the monetary program aimed at achieving the growth rate 25% liquidity was set for 1402.

On the other hand, contrary to the media atmosphere and the statements of some experts regarding the growth of the monetary base and its impact on the inflation rate in the coming months, it must be said that the most important variable affecting the inflation growth rate is liquidity. Because the growth rate of liquidity is always considered as one of the engines of inflation growth, and the measures taken by the central bank and the formulation of policy packages in the field of exchange rate stabilization and liquidity control promise to control inflation in the coming months.

Controlling liquidity while supporting production

Regarding the issue of reducing facility payments by banks following the policy of controlling the growth of liquidity of the central bank and controlling the growth of banks’ balance sheets, it should be noted that this policy has been considered as one of the most important economic priorities of the country due to the acute inflation situation in recent years. Of course, it is clear that the actions of the Central Bank in controlling the growth of the banks’ balance sheets have limited the payment of facilities in some sectors, but the Central Bank has tried to strengthen the methods of directing resources and facilities towards production, such as the development of gam bonds and chain financing. , electronic bill of exchange, factoring and other supporting tools, limit the effects of liquidity growth control policy on the real sectors of the economy.

21.2% growth in banking facilities

In addition to applying control policies in the field of banks’ balance sheets and overdrawing them from the central bank’s powerful resources, the central bank has not neglected the financing of the production sector; So that the statistics indicate a growth of 21.2% in the payment of facilities in the first six months of this year compared to the same period last year.

Based on this, the payment facilities of banks during the 6 months of 1402 amounted to 24,362.6 thousand billion Rials, which compared to the same period of the previous year, the amount of 4,256.6 thousand billion Rials (equivalent to 21.2%) has increased. Of the total payment facilities, the amount of 20,394.4 thousand billion Rials equivalent to 83.7% was allocated to business owners (legal and non-legal) and 3968.4 thousand billion Rials equivalent to 16.3% to final consumers (households). The share of facilities paid in the form of working capital in all economic sectors in 6 months of 1402 is 15,736.2 thousand billion rials, equivalent to 77.2% of the total facilities paid to business owners.

Also, the share of payment facilities in the form of purchase of personal goods by final consumers (households) is 1,523.2 thousand billion rials, equivalent to 38.4% of the total facilities paid to final consumers (households). The share of facilities paid for the provision of working capital of the industry and mining sector in the first half of 1402 was equal to 5,991.7 thousand billion Rials, which indicates the allocation of 38.1% of the resources allocated to the working capital of all economic sectors (amount of 15,736 2 thousand billion rials).

It can be seen that out of 7,281.5 thousand billion Rials of facilities paid in the industry and mining sector, 82.3% of it has been paid in the provision of working capital, which shows the attention and priority given to the provision of resources for this sector by banks in 1402.

Control of inflationary expectations in the currency market

Another measure of the central bank to control inflation was to curb the inflationary expectations of the foreign exchange market. In this regard, the central bank, in its new management period, within the framework of economic stabilization policies, focused its activities on three major areas: “Improving the expectations of society members by making the situation predictable” Economic”, “controlling foreign exchange expenses” and “increasing available foreign exchange resources in the form of using the capacity of economic diplomacy”.

Based on this, several measures have been taken in order to strengthen the stability and reduce the range of fluctuations in the currency market, gain the trust of economic activists and prevent the contagion of temporary fluctuations in the exchange rate to the price of basic goods and related to people’s livelihood, which shows that all these measures can be stabilized And he observed the calm of the currency market since the beginning of this year. Among the most important measures, the establishment of the currency and gold exchange center as a platform for all official and legal currency transactions in the country and a reference for determining the price of currency in the economy and continuing to discriminate between the rates of bank notes and remittances in this center.

One of the important achievements of the Central Bank this year has been the effectiveness of monetary and banking diplomacy in the form of freeing Iran’s blocked foreign exchange resources with foreign countries and, as a result, improving the prospects of the Central Bank’s foreign exchange reserves.

last word

Statistics show that the country’s economic growth in the first half of this year, including oil revenues, was 4.7% oil and 3.6% without oil, which indicates that the country is returning to the path of economic growth. An approach that, with the continuation of the policy of stabilization and predictability of the economy, will promise the prosperity of the economy as much as possible.