Iran FX and Inflation Report - Ordibehesht 1400 (April 21 – May 21)
___STEADY_PAYWALL___
The Iranian calendar month of Ordibehesht (April 21 – May 21) continued the trend of lower inflation, aided by a decrease in the NIMA exchange rate. In the FX market, the free market and the NIMA exchange rates began the period with rates of IRR 242,600 and 232,288 IRR respectively. Over the first half of the month both rates declined, reaching lows of IRR 209,000 and 204,513 mid-period. The NIMA rate stayed below IRR 210,000 and ended the period at IRR 205,474. However, the free market rate rose to IRR 232,000 and ended the period at IRR 230,000. The spread between the two rates in the month of Ordibehesht began at IRR 10,312, reached a low of IRR -6,258 and ended the period at IRR 24,526, roughly twice the spread registered at the end of the previous Iranian calendar month.
The monthly increase in the Consumer Price Index (CPI) decreased to 0.75 percent in the month of Ordibehesht with CPI reaching 308.4. The price of goods increased 0.21 percent and while the price of services rose 1.64 percent. There was a decrease of 0.14 percent in the CPI of non-durable goods. Meanwhile, durables CPI rose 0.3 percent and semi-durables CPI rose 2.53 percent. The price of food declined 1.17 percent nationally—the first decrease in 16 months—but there was an increase of 2.31 percent in the price of healthcare.
As the rial continued to gain value against the dollar, Iran economists are questioning whether the trend is sustainable. Gholamali Farjadi an economic professor, believes that the rial is appreciating in part because consumer demand for imported goods remains depressed and that the floor for the dollar exchange rate is IRR 150,000. Ali Ghanbari, a deputy minister of agricultural, believes the floor of the dollar price is around IRR 190,000, noting that Iranian exporters will not want the rial to appreciate further, hampering the cost competitiveness of their products.
Abdolnasser Hemmati, until recently Iran’s central bank governor and now presidential candidate, cited positive expectations with regards to sanctions relief and the assumption that the central bank will have greater access to its foreign exchange reserves as a primary reason why the rial was appreciating against the dollar.
