Iran FX and Inflation Report - Farvadrin 1400 (March 21 – April 20)
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The Iranian calendar month of Farvardin (March 21 – April 20), which marked the beginning of the year 1400, saw relatively steady trends in the FX market. While the free market rate saw a small decline, the NIMA rate rose slightly, leading to reduction in the spread between the two rates. In the goods and services market, the monthly inflation rate rose compared to the previous month.
As the period coincided with Iranian New Year holidays, the available data for the FX market does not cover the whole period. But overall, the free market rate started at slightly above IRR 250,000, rose as high as IRR 259,000, and ended the period at IRR 242,000, making a relatively steady trend with a minor negative slope. On the other hand, the NIMA rate began the period at slightly below IRR 230,000, reached as low as IRR 226,199, and finished at IRR 232,903. As a result of the two trends moving in opposite directions, the spread between the two rates went from a high of IRR 32,766 to IRR 9,097 at the end of the period.
According to the data released by the Statistical Centre of Iran (SCI), the country’s general Consumer Price Index (CPI) reached 306.1 in the month of Farvardin, making the monthly inflation rate 2.68 percent. There was a 2.64 percent increase in the price of goods, 2.78 percent in services, 1.88 percent in durables, 2.81 percent in semi-durables and 2.78 percent in non-durables. The inflation rates of the food and health categories were higher than the overall monthly inflation at 2.89 percent and 3.57 percent respectively.
Vahid Shaghaghi Shahri an economic analyst, forecasts a decline in the inflation in the year of 1400, expected annual inflation to fall to 22 percent as a result of reduced economic uncertainty, inflationary expectations, deepened depression and reduction in consumption demand. Another Iranian economist, Davoud Soori, explains that inflation in 1400 will correspond to the substantial fiscal deficit. On the exchange rate, despite speculation that the government is supporting the rate at the current level, Soori believes the current exchange rate reflects the real facts in the economy. Despite the prospects for sanctions relief and the possibility of the Central Bank’s foreign reserves being freed, Soori does not expect the rial to appreciate significantly as Iran will continue to struggle to access its reserves.
