"The inflation target was set based on key price indices, which may not be realized due to developments beyond CBI’s control,"Payman Qorbani was quoted as saying by the CBI public relations office.
In May, CBI Governor Abdolnasser Hemmati announced that the regulator was implementing a policy to “target inflation” and had set the inflation target at ± 22% for the year ending next May.
At that time the bank claimed the target was based on “realistic assumptions and scenarios” and it had enough monetary policy instruments at its disposal to control the high and rising prices.
Given the pattern of galloping inflation many then, as now, consider the target as "bold and ambitious".
In response to public and private reservations, Qorbani said the target must be gauged against "overall annual inflation [average inflation over 12 months of the year] by next May and point-to-point inflation cannot be a practical basis for setting a target.”
Whether or not the CBI achieved its lower inflation goal should be judged in the next six months, he stressed.
Average goods and services Consumer Price Index in the 12-month period ending Nov. 20, marking the end of the eighth Iranian month, increased by 29% compared to the corresponding period last year, the Statistical Center of Iran said in its last report.
SCI had forecast the average annual inflation rate for the preceding Iranian month that ended on Oct. 21 at 27.2%.
Consumer price inflation for the month under review (Oct. 22-Nov. 20) was up 46.4% compared with the similar month of the previous Iranian year. Year-on-year inflation for the month ending Oct. 21 was 41.4%.
Overall CPI grew 5.2% last month compared to the month before. Month-on-month consumer inflation was 7% for the preceding month (Sept. 22-Oct. 21.). SCI put average annual inflation for urban and rural areas at 29% and 28.8%, respectively.
Qorbani blamed the higher inflation rates to a combination of factors plaguing the economy, namely the fresh US sanctions, high inflation expectations due to the tanking of the national currency, steep increase in forex rates and the Covid-19 pandemic that hurt foreign trade.
"Taming inflation is the main goal of the central bank. Despite nonconformity with the set target, the bank will strive to pull inflation closer to the target," the senior official pledged.
Ballooning Money Supply
CBI says the ballooning money supply emanating from budget deficits is a major factor pushing up inflation. As for the role of monetary variables, the CBI said broad money supply grew 37.2% annually by Oct. 21 or one percentage point higher than the previous month. In the seven-month period from the beginning of the fiscal year in March money supply increased 19.7%.
Likewise, the monetary base was up 31.9% on an annualized basis and 10.1% since the beginning of the year. As part of measures to control the monetary base, the CBI has encouraged lenders to engage in its open market operations.
Using bonds as collateral to borrow from the CBI and regulating interbank interest rate are key OMO elements.