The Interest Rate Quandary

Higher interest rates seem inevitable but understanding the need, composition and rationale is of the utmost importance, Kamran Nadri, a monetary and banking commentator said.

“Deciding rates is a challenge of epic proportions. Estimating the consequences of such measures is the other key issue the central bank must be prepared for,” Nadri said.

However, what is apparent is that if the “Central Bank of Iran sticks to its passive position in the market, banks will face a liquidity crunch and pile pressure on the regulator to increase the monetary base. The outcome will he higher inflation rates plus rise in inflationary expectations for which the passive monetary policymaker will be responsible.”