The state bankers agreed to cut the interest of the one-year deposit accounts to 20% and decline the interest rate of banks mutual contracts by 2 or 3 % due to lower inflation rate. However this decision needs to be approved by the central bank’s Money and Credit Council. In case of the council’s approval this rates will be effective from May 2015. Lower interest rate will decrease their financial costs. Besides, the banks have already offered loans with current interest, there profit of which will be declared on 2015 financial reports. Although the final approval can have a short term positive effect on market, it must be noted that the private banks and the credit institutions have no willingness to follow this agreement due to their competition for absorbing more liquidity.
The possibility of interest rate changes are increasing. Besides influencing the money demand and supply, any changes in interest rate can act like a double edged sword for banks. Decline in cost of interest will lead to lower cost of money for banks. Moreover, deposit cash withdrawal will be likely to happen if the interest rates are cut by more than 2 percent. If any changes in interest rate associate with the final nuclear agreement, a huge liquidity will flow from banks to other capital market sectors.
While the inflation rate has slipped to 15 %, many experts believe that the deposit interest rate cut must be done to get the liquidity out of the banking system. By Lausanne framework deal and the possibility of nuclear agreement the probability of cut in the banking interest rate has increased. However, the banking account situations will also matter for this decision. Currently most of the banks have high bad debts accounts that have declined their lending power.
No active participation of investors in market due to current New Year holidays, more optimistic view over nuclear negotiations and reopening of oil refinery companies after almost a year can be considered as the main reasons for upward trend in Today’s market. Although the tensions in Yemen overshadow the nuclear talks in Lausanne, the possibility of oral or written agreements is getting stronger.
The inflation rate was announced 0.6 percent for the last month of the year ended 20 Mar 2015. By considering this number the annual inflation rate will reach 14.3 percent which is unprecedented in the last four years. The government was successful in curbing the monthly inflation in the last year and luckily the global recession in the last six months has accelerated it.
- During the past few days, in different events, the chief of central bank of Iran, Seif, emphasized the central bank’s plan for the banking interest rates. However, he asked the banks to reintegrate the rates first by themselves before any action taken place by the central bank. The Melli Bank’s CEO also said that the deposit interest rate could be defined at 20%level, if the inflation rate would be announced at 15%. .it is clear that the interest rate will definitely decrease next year but it’s unlikely to become less than 18%.