In recent few months, Rouhani’s government had been euphoric about the prospect of a single-digit inflation rate the achievement of which was much-envied and expected; now however, the euphoria is gradually replaced by a grim prospect of handling an economy once again facing the increasing rate of inflation; this is however not unexpected to the government’s economic entourage as well as other observers outside it who believed that from a certain point, controlling inflation would be an uphill task, since point-by-point inflation has been increasing.
Government has set a priority for itself taming the wild beast of inflation, and no signs are in the horizon that the government would abandon the policy altogether to seek other options to bring boom to the economy; government’s conduct of recent months provides evidence of this policy; but the waves have now turned for Mr. Rouhani’s cabinet with inflation turning to be in a rising pace, challenging some of government’s plans to curb the beast; official statistics of the Central Bank shows a disturbing trend in inflation since June, while observers believe that at the end of the day, the overall effect will apply to the annual rates. This would be a legacy President Rouhani’s government leaves for the next government coming out of May 2017 presidential elections. For an overall inflation rate of less than 10 per cent, a point-by-point inflation rate of 0.8 per cent is a necessity, which is far from that figure of the recent months. A second factor is liquidity which contributes to rise in inflation, and there is a direct connection between the two in a course of 6 or 9 months.
Mehdi Taqavi, an economist, told Mehr News Economic service that concerns over point-by-point inflation should be played down; “the window is no longer open for the return of inordinate amount of inflation rate of past years, and many accounts of return of inflation in scales should not be considered as genuine,” he added.
“Some analysts would cast doubt on government’s newly-launched plans to boost production, objecting that input of money to the market helps the beast to rise from its ashes, while the input has targeted production sector, and accordingly, has boosted supply side; the government has worked to stimulate demand side to avoid the effects of imbalance,” Taqavi told Mehr News.
The knell has been tolled for the government, calling for more robust anti-inflationary policies by the cabinet; however, with government working to set a unified exchange rate at least for few months, the policy will contribute to a certain amount of inflation.
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