TEHRAN- Iran’s inflation has become a persistent, multi-layered economic problem that cannot be solved through a single tool or a simple policy choice. Economists interviewed by IRNA argue that suppressing prices, restricting demand, or relying only on monetary instruments such as interest rates or liquidity controls will not break the inflation cycle. Inflation can only be contained when the policymaker simultaneously controls the money-creation engine, directs financial resources toward production, prevents supply-side shocks, and protects the purchasing power of vulnerable groups without generating a new inflationary wave.

After decades of inflation accompanying Iran’s economy, the problem can no longer be attributed merely to growth in money supply or demand. Alongside political factors, sanctions, and blockade conditions, a combination of monetary, foreign-exchange, fiscal, trade, and supply-side disruptions has made rising prices one of the most stable and painful concerns for households. In this environment, the policymaker does not face a simple choice between raising interest rates or controlling liquidity. It must manage bank behavior, the budget deficit, foreign-exchange flows, repatriation of export earnings, capital flight, the supply of essential goods, and household purchasing power all at once.

The article stresses that success in anti-inflation policy becomes clear when the “unruly horse” of inflation is brought under control. In this context, containing inflation does not mean prices begin to fall. Rather, it means the policymaker has seized control of the inflation-generating process and slowed it down. The recent slowdown in inflation over two months, reflected in Central Bank statistics, raised hopes for improvement in the coming months. However, this success was achieved through liquidity management and strict Central Bank policies requiring banks to observe monetary discipline and preventing money creation.

A review of economists’ views shows that the prescription for containing inflation is a combination of monetary and fiscal discipline, control of banks’ balance sheets, management of interbank interest rates, directing credit to productive sectors, strengthening the supply side, stabilizing foreign-exchange and trade policies, and targeted support for lower-income deciles. Implementing this package requires coordination between the government and the Central Bank and avoiding temporary, contradictory policies.

Experts share a consensus principle: Iran’s inflation in recent years is rooted more in supply shocks caused by war, sanctions, and shortages of production inputs than in money printing or rising liquidity. Kamran Naderi, a university professor, argues that a supply shock caused by war cannot be contained with monetary policy. When a naval blockade halts trade, raw materials cannot be imported, and essential goods and oil cannot be sold, prices inevitably rise. Even if the Central Bank controls interest rates, this structural inflation remains.

Economic analyst Majid Shakeri makes the same point explicitly. In food supply, for example, attention must be paid both to imports and to the pressure of blockade and sanctions. Therefore, having a response to the blockade—whether economic or military—is itself a correct response to inflation. These views show that monetary policies, including control of bank balance sheets or interest rates, are only partly effective. Other economic policies must also be used.

Economic expert Hassan Hassan-Khani, emphasizing the supply shock, notes that the economy faces recession and idle production capacities, with many production units operating below real capacity. The main source of inflation, he believes, is shocks. Problems preventing the supply of production inputs and goods have a major effect on inflation. University professor Morteza Ezati warns that if policies do not proceed correctly and goods become scarce in the market, inflation will jump again.

Inflation in Iran has for years gone beyond a purely monetary phenomenon. It is now a multifaceted issue. The first question in policymaking is whether one specific tool—such as raising interest rates or limiting bank balance-sheet growth—can fight inflation and stop price increases. Majid Shakeri insists that to contain inflation, its components must first be understood. Inflation is not cured merely by suppressing demand, because the economy simultaneously needs reconstruction, production growth, and relief from supply-side constraints. If price growth in different sectors does not stem from one cause, a single prescription cannot produce the desired result.

Kamran Naderi also emphasizes using several tools at once. Among monetary tools, he gives special importance to the interest rate. After that come control of banks’ balance sheets and the statutory reserve ratio. If the Central Bank can control the interbank market interest rate, growth in the monetary base will also be controlled to some extent automatically. Thus, the first common point among experts is that containing inflation requires a coordinated set of policies. The main disagreement is over how much weight each tool should carry in Iran’s current conditions.

One of the most important tools experts propose is controlling the banking network and preventing money creation by banks. Unregulated growth of bank balance sheets can increase money creation and intensify inflationary pressures. Naderi believes the Central Bank must pursue two paths simultaneously: managing the interbank interest rate and quantitatively controlling banks’ balance sheets. In current conditions, directly raising deposit and loan rates is not necessarily appropriate. Instead of focusing on rates passed directly to people and producers, the Central Bank should manage the interbank rate. By controlling balance sheets, it can regularize bank activity and direct facilities toward the country’s essential needs.

Shakeri defends the Central Bank’s balance-sheet controls, saying they have helped reduce liquidity growth in recent months. The Central Bank can even use the disqualification of bank managers as an important deterrent for monetary discipline. Alongside controlling liquidity, the monetary policymaker must specify which sectors should receive limited financial resources, or strengthen the supply side. For example, if inflation in essential goods has risen, the policymaker should not merely reduce demand. It must plan to increase production or imports of those goods. This approach links monetary policy with industrial policy so that limited resources put the least pressure on production. Credit policy must become a targeted tool for solving specific economic problems, not a general policy without priorities.

Experts stress that part of inflation comes from the supply side, and monetary policy alone cannot counter it. Naderi views this as a product of sanctions and economic blockade. When trade is disrupted or foreign-exchange revenues fall, the economy faces a supply shock. A shortage of goods naturally raises prices, and higher interest rates or restricted liquidity cannot bring into the market a good that does not exist. If the source of price increases is a shortage or supply-chain disruption, the solution must be sought on the supply side.

Shakeri argues that in current conditions, an economic response to trade restrictions and goods supply is part of anti-inflation policy, so that supply and demand can balance and inflation does not rise from this area. Controlling inflation should not mean suppressing demand. Even in a war situation, the economy needs production growth and reconstruction. The policymaker must choose measures that produce the greatest results. Support for production should not become widespread resource distribution or untargeted exemptions. Resources must reach sectors that can increase supply and remove inflationary bottlenecks.

The exchange rate is one of the most important channels transmitting shocks to prices. Therefore, exchange-rate stability is inseparable from anti-inflation policy. Hassan-Khani believes the bulk of inflation should be sought in incorrect economic policies. Controlling inflation requires simultaneous stability in foreign-exchange, monetary, fiscal, and trade policies. Without coordination and a clear plan to support households, public confidence cannot form. The exchange-rate issue is not limited to the Central Bank’s reserves. Even if export earnings do not return to the official economic cycle, the foreign-exchange market will remain turbulent. Repatriation of export earnings and prevention of capital flight must be central to foreign-exchange policymaking. Until inflation is controlled, people cannot be expected to abandon speculation and enter production.

The article concludes that a division of labor is necessary. The Central Bank must continue controlling bank balance sheets, manage the interbank interest rate, and prevent unbacked credit creation. Credit restriction must not be blind; limited resources should go to sectors that increase supply and reduce inflationary bottlenecks. The Planning and Budget Organization must prevent the budget deficit from being transferred to banks and the Central Bank, because inflationary financing can neutralize all Central Bank efforts. On the foreign-exchange front, policy stability, export-earning repatriation, prevention of capital flight, and confidence-building for domestic investment are priorities. On the supply side, targeted imports, raw materials, removal of production bottlenecks, stronger trade, and maintaining essential goods flows must be part of the anti-inflation program. E-vouchers can serve as temporary, targeted support, but only with non-inflationary resources and careful design.

Overall, Iran’s economy needs a multi-layered anti-inflation policy—one that deals simultaneously with money and interest rates, but also with foreign exchange, the budget, banks, production, trade, and household livelihoods.

EF/MA