Raising interest rates raises production costs / The Minister of Economy is not in a position to set interest rates

According to Trade News, many economists believe that with the increase Interest rate Unbridled inflation can be controlled, but implementing such a policy has many opponents among financial market participants as well as a number of economists.

The issue of raising bank interest rates is one of the most controversial issues in the country’s economic circles. Proponents of this policy believe in controlling the rate Inflation, The interest rate tool should be used. According to this group of experts, this measure so-called collects liquidity from the society and enters the country’s banking system.

But opponents of the policy also believe that Increasing bank interest rates It leads to a recession in the country’s economic environment. The economic recession has no consequences other than unemployment and reduced investment in various fields. Many financial market participants are also among the serious opponents of this policy, because in this case, capital will flow from the markets to the banking system.

Now a group of pro-policy economists are claiming that the government is preventing this by commenting on the work of the Monetary and Credit Council. Although the government has repeatedly denied this, some of the government’s actions and approvals refute the government’s claims. Last year, the Ministry of Economy, in one of the approvals of the 10-package package for capital market support, set a 20% ceiling for interest rates. Many also believe that the government should not ignore the independence of the central bank and interfere in the work of the Monetary and Credit Council.

The government is not allowed to interfere in setting interest rates

Jafar Ghaderi, member of the Program and Budget Commission of the Islamic Consultative Assembly on how to determine Interest rate “Determining this issue is one of the responsibilities of the Monetary and Credit Council, and the government has no involvement in this matter,” he told Tejaratnews.

The MP said that the Minister of Economy could not assign any duties to the Monetary and Credit Council. The Minister of Economy and his Deputy are members of this council and can express their views, but it is not possible for the government to determine the task in this regard.

“Now, in some cases, the views of the Monetary and Credit Council may be in line with those of the Ministry of Economy,” he said. But in general, the Minister of Economy is not in a position to impose his views on this council.

Controlling Inflation or Recession?

Ghaderi stated: Rising interest rates On the one hand, it can draw liquidity from real assets to banks. But it should not be forgotten that this policy increases the cost of production.

This member of the Program and Budget Commission of the parliament pointed out: Therefore, it should be done in such a way that the positive effects of the interest rate increase outweigh the negative consequences. How to act in this regard is decided by experts and officials in the Monetary and Credit Council.