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Iran FX and Inflation Report - Dey 1400 (December 22 – January 20)

Iran FX and Inflation Report - Dey 1400 (December 22 – January 20)

A more positive atmosphere surrounding the negotiations over the future of the Joint Comprehensive Plan of Action (JCPOA) buoyed the FX market in Iran during the Iranian calendar month of Dey 1400 (December 22, 2021 – January 20, 2022). The free market exchange rate declined while the NIMA rate held steady, decreasing the spread between the two rates. However, monthly inflation rose on the back of the previous month’s exchange rate increase. ___STEADY_PAYWALL___

The free market rate declined from a peak of IRR 302,000 to end the month at IRR 279,500. The NIMA rate rose slightly, rising from IRR 244,820 at the beginning of the month to IRR 250,466, before settling at IRR 247,737. The spread between the two rates fell from IRR 57,180 to IRR 31,763.

According to the Statistical Center of Iran, the national consumer price index (CPI) reached 388.2 in the Iranian calendar month of Dey, putting the monthly inflation rate at 2.37 percent, up from 1.66 percent in the previous month. Still, the annual inflation rate fell 1 percentage point from the previous month to 42.4 percent. The bounce back in monthly inflation was led by a rise in services prices, which rose 2.5 percentage points to 3.56 percent month-to-month, and an increase in housing prices. Rent prices rose 4.4 percent in Dey.

Iranian media attributed the strengthening of the rial to positive news emerging from the JCPOA negotiations. Meanwhile, the Iranian president’s state visit to Russia and the Iranian foreign minister’s visit to China, both of which led to reports that major cooperation agreements would soon be “implemented,” did not lead to significant movements in the FX market, indicating that the FX market is more sensitive to negotiations that could lead to the lifting of U.S. secondary sanctions.  

During the month of Dey, Iran’s central bank governor, Ali Salehabadi held a meeting with leading economists. During the meeting he reassured them that he would take action to tame inflation, promising a package of reforms to the banking sector that would slow growth in the money supply.  


 

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