Increasing the bank interest rate is a positive measure to reduce the demand for currency

According to Iran Economist, the Governor General of the Central Bank announced in a press conference with the media on Sunday this week that the bank interest rate will be increased and said: This issue is subject to the approval of the Monetary and Credit Council.
Salehabadi emphasized that changing the bank interest rate requires expert work, and in this regard, this proposal is being reviewed by the Money and Credit Council, and no specific figure is considered.
Seyed Morteza Ofgeh, professor of economics at the university, in an interview with Iran Economist, said: People always seek to maintain their purchasing power.
He added: 40% inflation will make people not inclined to deposit with banks.
This economic expert stated: 17-18% bank interest compared to 40% inflation means that people’s purchasing power decreases by more than 20% every year, and as a result, people don’t tend to make deposits with banks.
He emphasized: The increase in the interest rate is actually a step towards reducing the losses of depositors and can help groups who do not have the power to take risks and do not want to enter the currency market.
Ofeke believes that the increase in the bank interest rate will help to reduce the demand for currency and prevent people’s liquidity from entering the car, gold and currency market.
This economic expert stated: until inflation does not decrease, at least as much as the bank interest rate and not close to this rate, the tendency for people to make deposits in banks is low.
He emphasized: The increase in the bank interest rate is a positive measure, but it is not enough and its effectiveness should be checked.
Ofeke said: Bank interest rate is a sensitive figure, and although it attracts deposits, it increases the costs for the borrowers’ facilities, especially the production sector, so the central bank is sensitive to this rate.