Iran Low on Options as Hyperinflation Concerns Spark Gold Dash

From Bloomberg.com

Original source

Iran has few policy options to end turmoil in its currency markets, as the U.S. and allies seek to inflict enough economic pain to force the Islamic republic into concessions over its nuclear plans, analysts said.

The rial has depreciated as much as 40 percent against the dollar in street markets since August and gold purchases have surged as residents seek to shield savings. The currency plunge led to unrest in Tehran’s markets last week as police used tear gas to end protests. Iran has raised interest rates on deposits and opened an exchange center to stabilize the currency market.

‘Hyper-Inflation’

The run on the rial has exacerbated inflation that had already been pushed up by the removal of subsidies on energy and food. The official rate rose to 23.5 percent in August. The real rate, which adjusts for the currency depreciation, is three times that, according to Steve Hanke, a professor of applied economics at Johns Hopkins University in Baltimore.

“We’re getting into what is technically hyper-inflation,” with an “implied inflation rate” of about 70 percent a month, Hanke said.

Concern that savings are being eroded is leading Iranians to other assets, including gold and property.

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