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The CBI Inflation Report

Oct, 2015

In its second monthly report, the central bank released inflation of tradable and non-tradable in Mordad after its first report of the kind in Tir, giving the signal that the bank has begun to release such reports regularly every month.

The Tir report showed that the inflation rate for tradable goods was 12 percent year on year in Tir, while it was 19.6 percent for non-tradable goods. One can compare the figures with those in 1392, when the inflation rate for tradable goods was about 40 percent and about 25 percent for non-tradable goods. However, inflation started decreasing since last year so that in Tir inflation for tradable goods was -1.5 percent and for non-tradable goods was 1 percent.

The latest report showed that the inflation trend continued in the month of Mordad, when divergence among index components has been increasing.

Experts are warning that the Dutch Disease may return to the country, with the rising inflow of foreign currencies following a rise in oil exports. If the disease comes back, the rial gains value as a result of the reinforcement of the oil industry.

Consequently, domestic products will become cheaper compared to imported products. This could lead to higher inflation especially if an expansionary policy is adopted by the government. However, not the price of every group increases. With a fall in the real value of foreign currencies (if trade balance remains positive and inflation gets rising) foreign producers can gain a bigger share in the Iranian market and therefore the price of tradable goods will increase compared to non-tradable goods which are not imported. As demand for non-tradable goods increase their prices would increase too as their supply is limited. 


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