Iran’s annual inflation rate moved up to 13.5% y/y in the seventh month of the current Persian year (ended September 22) from 11.5% in the previous month, the Central Bank of Iran said on September 28.

The official figure massively conflicts with analyses by some internationally known economists who say that, given the collapse of the Iranian rial (IRR) in the face of renewed US sanctions imposed on Iran, Iranians are actually dealing with inflation running at around 250%.

On September 27, one of those economists, Professor Steve Hanke of Johns Hopkins University in the US, said in a tweet: “Iran needs to institute a gold-backed currency board or the value of the rial will continue to plummet. Tying the rial to a commodity is the only way to ensure the purchasing power of the rial and curb Iran’s runaway inflation.”

The Iranian rial (IRR) has made some slight gains in the past few days, buoyed by the news that the government is permitting the central bank to intervene in the markets to address its nosedive. Its all-time low of IRR190,000 to the USD was set on September 26. By around 17:00 Tehran time on October 1, it stood at IRR162,500.

On the inflation front, food and household prices are, despite the government’s best efforts, increasing across the board as the costs of raw materials imported through the secondary and tertiary markets continue to rise in line with the nosediving IRR.

Point-to-point CPI inflation stood at 31.4% y/y, marking a 6.1% increase month on month, the central bank said.

The central bank listed m/m figures as follows: food and beverages at 17.5%, tobacco 31.4%, clothing and footwear 9.8%, housing and utilities 9.5%, home furnishings 17.4%, health 10.4%, transport 15.9%, communications 10.7%, recreation and culture 23.5%, education 13.1% and restaurants and hotels 13.4%.

Shunting aside concerns
US President Donald Trump, shunting aside the concerns of the major power signatories that remain in the Iran nuclear deal—the UK, France, Germany, China and Russia—is levying unprecedentedly fierce sanctions against Iran in an attempt at strangling its economy. Trump, who in early May unilaterally pulled the US out of the nuclear accord—drawn up in 2015 to shield Iran from crippling sanctions in return for nuclear development programme compliance—wants to force the Iranians to the table to renegotiate Tehran’s role in Middle East affairs. The Iranians also claim the Trump administration is targeting regime change in Tehran, despite White House denials.

On September 26, with relations between Tehran and Washington souring even further following combative speeches at the UN General Assembly in New York, the IRR sank to its latest all-time low of 190,000. That put its year-to-date loss against the world’s primary reserve currency at 77.4%.

The central bank was given room to make market interventions following the return of President Hassan Rouhani to Tehran after his UN General Assembly appearance. Officials “gave the central bank governor the necessary authority to intervene in the foreign exchange market and to manage it”, Islamic Republic of Iran Broadcasting (IRIB) reported late on September 29.

However, Abdolnasser Hemmati, who became the CBI governor in late July, has previously said that he was not minded to react to the devaluation of the rial and would instead allow market forces to play out. Whether the unprecedented scale of the rial’s collapse—largely caused by Washington’s sanctions-driven attempt to cripple Iran’s economy to force the country into talks on its role in Middle East affairs—brings about a clear change of mind remains to be seen.