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Bahmani Appointed Governor of Central Bank of Iran


Source: Press TV

Iran's central bank General Secretary, Mahmoud Bahmani has been appointed as governor following the dismissal of Tahmasb Mazaheri.

Iran's President Mahmoud Ahmadinejad dismissed former governor Mazaheri on Sunday, days after the Central Bank of Iran (CBI) announced plans to raise the interest rate on deposits in a bid to slow the accelerating inflation rate.

Under Mazaheri's leadership, the CBI issued a directive allowing banks to raise interest rates on deposits above current rates.

"Based on the new directive, banks can pay more interest to customers than the announced [Central Bank] rates," Mazaheri said.

The governor had said the directive would go into effect at the end of the Iranian month of Mehr (October 21) but following Mazaheri's dismissal it is now doubtful that the directive will be implemented.

Current bank deposit rates are below the rate of inflation that reached 27.6 percent for the 12 months prior to August 21, 2008. This has led to fewer deposits as investors speculate in a booming real estate market.

Media reports suggest there was disagreement between government officials who want to keep interest rates low to stimulate business and Central Bank officials who favor deflationary policies.

The government of President Mahmoud Ahmedinejad initiated fast-yielding projects early in the administration. Public banks increased small loans to entrepreneurs for a fast return, aiming to increase employment.

However, economists at Iran's Central Bank have argued that low interest rates only stimulate speculation in areas such as commodities and real estate which feeds rising prices.

The chair of Iran's Majlis' Economic Commission, Gholamreza Mesbahi-Moghadam, in an interview with Fars News Agency expressed regret over the departure of Tahmasb Mazaheri from the CBI.

"The change of the CBI was not desirable and I believe this change should have not taken place," Mesbahi-Moghadam said.

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