TEHRAN, Iran, Oct.26
Trend:
Reducing bank's interest rates in Iran might cause owners of saving accounts to withdraw their money from banks, said an economic analyst.
"Iran has currently reduced interest rates for saving accounts due to inflation therefore people are not inclined to invest their money in banks ," said Iman Eslamian , Trend reports citing IRNA.
"Banks could not easily increase interest rates due to balance problems that is caused by the fact that banks do not have sufficient revenue to cover the costs of high interest rates in short term and the costs of financing would raise," he said.
Eslamian also noted that the Central Bank of Iran could not increase interest rates and loan's interest rate since these two are connected and therefore businessmen could not have a suitable financial source. Additionally, It is not a suitable time to increase interest rates in current days because of instability and market uncertainty so the increase would not have definitive effect on behavior of businessmen and people
"Although it does not mean that by an increase of interest rates banks would face sudden rush from investors, the economic atmosphere should improve first since changing one percent would have meaning for public opinion and would lead to the results that the Central Bank of Iran seeks," he added.
According to him, utilizing various monetary tools would create certainty in the market then banks could decide on increasing interest rates. Furthermore, the policies of the Central Bank of Iran on interest rates were good so far and by using instruments such as open market operation it could create suitable rates.
"The decline of foreign currency rate indicates that policies of the Central Bank of Iran were successful but other economic sectors should be managed better to have the best effect on market and services," he noted.
Some economic experts suggest that during current situation increase interest rates would prevent sudden rush of investment in various markets including foreign currency market , however some say investment on government's bonds would prevent the increase of liquidity and would improve the government situation to finance its budget deficit.