7th APRIL 2015 - Vol.XXXVIII No.018
Business News

Tehran rate cut 'is economic suicide'

TEHRAN: Iran's Press and economists yesterday slammed a decision by President Mahmoud Ahmadinejad to slash interest rates, describing the move as "incomprehensible" and risking "economic suicide".

The rate cut decision, which economists said could overheat an already inflationary economy, appeared to have been taken without the knowledge of economy minister who had said exactly the opposite just hours earlier.

"Economic suicide for banks," the Mardomsalari newspaper said of move.

"The economy minister and the head of the central bank have to explain this decision since this decree is incomprehensible for economists," the economy minister in the previous reformist government, Saeed Shirkavand, said.

The government spokesman said it was cutting state bank interest rates to 12 per cent from 14pc and rates at private banks to 12pc from 17pc in a bid to create fair competition between lenders.

"This ad-hoc decision will not benefit the investment market at all and will only terrify investors," the former head of the Tehran stock exchange Hossein Abdo Tabrizi told the Kargozaran newspaper.

"They will start to worry that maybe tomorrow there will be such decisions to control and create a price ceiling for shares," he said.

The centrist Ham Mihan daily said that hours before the decision was announced, both Economy Minister Davoud Danesh Jafari and central bank chief Ebrahim Sheibani said rates would stay the same.

"They were unaware that (the president) was pouring cold water on the economic commander of his cabinet in order to increase the temperature of Iran's economy," the daily said.

Ahmadinejad have been repeatedly criticised by the press for stoking already high inflation in the Islamic republic with high spending and promising lavish local investment projects on provincial tours.

However the president, who ran on a platform of distributing the country's riches more evenly, insists that inflation is under control and the government is doing all it can to reduce poverty.

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