Conditions for achieving inflation targeting of the Central Bank

An economist believes that inflation is caused by various factors that can be in the economy under the heading of demand pressure, which manifests itself in the form of increasing demand, that is, when demand exceeds supply and in fact people’s purchasing power increases but supply increases. Has not been. This happens when governments inject money into the economy, which in turn increases demand and leads to inflation.

In an interview with IBNA, Amrullah Amini stated: “Sometimes the pressure of expenses causes inflation, and inflation rises when there is no productivity.” The next factor that plays a role in inflation is the increase in inflation expectations, which is mostly the psychological atmosphere in society.

He continued: “Another type is structural inflation.” That is, the structure of the economy is such that it does not increase production. For example, if the production efficiency is low in the agricultural sector and high in other sectors, people do not go to production and agriculture and are directed to unproductive sectors.

“We have had an average of 20 to 30 percent inflation each year over the years,” he said. “But we do not have hyperinflation.” Hyperinflation is a very high amount of inflation, under which prices change hourly and rise sharply.

Amini said that if the central bank observes more monetary discipline and monitors the performance of private banks that do not have productive activities in the economy and are not productive, and most importantly, does not come under government pressure, it can control the inflation rate well and even Bring inflation below 10% within two years.

He pointed out that part of inflation is also related to government borrowing from the central bank, he explained: When the government budget is unbalanced and expenditures exceed revenues, they put pressure on the central bank to borrow money, and this is while in The economy cannot be borrowed in this way, but there must be support.

The economist added: “If the central bank is forced to print money, the pressure on demand will increase as it enters society, which will eventually lead to higher prices and inflation.” Referring to the inflation target by the central bank, he said: “This target will be achieved by 22 to 24 percent and will be reduced even more than this figure, but there are conditions that must be considered.” The first is that the central bank should not lend money to the government, the second is that its accounts should be transparent, the third is the monetary discipline of this financial institution, and the fourth is more control over the performance of banks, especially private banks.

According to Amini, non-productive banks should be restricted. South Korea’s GDP is four times that of Iran, but the number of our banks and institutions is three times that of the country, which is a disaster. We have many patterns in global banking that it is better to use these patterns like the pattern of banking in countries like Germany and Japan.