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Iranian economist: Iran's Central Bank needs cohesive plan to hit inflation target

07 June 2020 [15:30] - TODAY.AZ
By Trend

The Central Bank of Iran (CBI) needs a cohesive plan for it's inflation target plan, Iranian economist Ali Akbar Nikoo Eghbal told Trend.

"Although it's not impossible, but the country's economic situation and long history of inflation fluctuation, especially in the past two years, does not indicate that the inflation would be reduced and possibly reach the target of 22 percent," he said.

"Yet, the 22-percent inflation rate is also problematic," Eghbal said.

"It is likely that inflation is caused more by aggregate demand than supply, therefore the target of 22 percent means the aggregate demand in the current Iranian year (began March 20,2020) would be 22 percent more than total supply," he said.

"Total supply is formed by various components of GDP that are divided into quantitative increase of national investment and increased productivity of these capitals, so it would reach the rise of GDP in the current Iranian year," he said.

"High increase of GDP would effectively help the increase of liquidity, on the other hand its necessary to estimate aggregate demand in the current year," he said.

"The most important factor in increase of demand for money is increase of liquidity, various estimates show the government's budget deficit in the current Iranian year is caused by sanctions, reduce of oil export, reduce of tax revenues," he said.

"It's possible that other policies such as sale of government shares of public companies and banks via stocks would not help make up for the deficit," he added.

"The general expert opinion indicate that positive gross domestic product in the current Iranian year can not be expected. The announcement of Iran's Central Bank lacked various scenarios to use instruments and monetary policies and quantitative processes to reach the target inflation rate. So, we should wait until the Bank comes up with a cohesive plan," he said.


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