Interest Rate Cuts to Continue

EghtesadOnline: Interest rates will continue on the downward slope but it is unclear how much further down it will go, the CEO of the Bank of Industry and Mine said Monday.

News ID: ۷۶۸۳۰۱

19 July 2016

On the pattern of gradual decline in deposit and lending rates and the necessity of banks to fall in line, Ali Ashraf Afkhami said from late June all banks are obliged to comply with the new rates, adding that his bank too is doing likewise.
“All dealings from late June onwards must be made according to the new rates”, he told IRNA.
Noting that banks can no longer offer interest based on previous rates, he said interest will be paid based on the new rates, a matter that can be verified. “The trend of lowering interest rates will continue, but it is unclear by how much”, he added.
According to Financial Tribune, the highest monetary decision-making body – the Money and Credit Council – voted last month to lower lending rates by two percentage points. Earlier private banks had decided to voluntarily lower their one-year deposit rates from 18% to 15%.
According to Afkhami, in light of the fact that inflation is on the decline, “deposit rates and consequently lending rates will go down and we will move in the direction of creating a balance between the rates so that they will be compatible with the economic reality.”
The senior banker says a decrease in interest and lending rates is obviously suitable for businesses and if the trend continues, they too will show a higher level of enthusiasm. Admitting that while it will  difficult for the banks to adapt (to the lower rates) in the short term, he said he has little doubt that in long-range “this will be helpful and reduce consumer prices.”
“Before the nuclear agreement we were witnessing interest rates  higher than 26-27%,” he said. “While interest rates were lower in state-owned banks, private lenders usually offered higher interests. Now the rates have been capped at 18%.”
Reiterating his point that curbs on interest rates will positively affect prices of goods, Afkhami added that it will also strengthen the marketing and competitiveness of domestic goods in international markets.