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Iran officially raises interest rate to 23%

File photo shows a sign of the Central Bank of Iran in northern Tehran.

Iran has officially raised the cap on interest rates that banks in the country can charge weeks after media reports suggested the government is trying to use the monetary policy instrument to contain the rising inflation.

A Monday report by the IRIB News said interest rate on loans given by state and private banks in Iran had been increased to 23% while rate of deposits rose to 22.5%.

Iran’s High Council of Money and Credit authorized the 5% increase in interest rates that had been initially proposed by the Central Bank of Iran (CBI), said the report.

The hikes came weeks after CBI and government authorities said they have plans to use higher interest rates to control money supply as a root source of soaring inflation in Iran.

In a move interpreted as a prelude to raising interest rates, the CBI in late December allowed Iranian banks to issue certificates of deposit with a yield rate of 23%.

Iranian banks then started offering rates of up to 25% for long-term deposits, according to reports published in the local media later that month. 

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