According to the Public Relations of the Monetary and Banking Research Institute, this policy report written by Hamid Zaman, and Maryam Hemmati under the scientific supervision of Seyed Ahmad Reza Jalali Naeini, while examining the structural requirements of transferring the monetary policy to the inflation-targeting framework, examines the mechanisms for implementing the inflation-targeting framework, including inflation targeting, inflation forecasting, monetary policy instruments, monetary policy decision-making process, and the Central Bank's communication policy regulation.
In the management summary section of this report, stating that the results indicate that the structural requirements of the inflation-targeting framework are relatively provided in the Iranian economy, and especially with regard to the declared inflation target, it is specified: The key point is that these structural requirements are not necessarily one-way in relation to inflation-targeting, but in the process of implementing the inflation-targeting framework, the relevant structural requirements such as central bank independence, limitation of financial dominance, development and deepening of financial markets, including the foreign exchange market, can be achieved at a more desirable level from the current situation. Achieving such a structure, of course, requires political commitment, commitment to the proper implementation of this framework, and an understanding of the challenges ahead in the current difficult situation.
In another part of the management summary of this report, we read: Regarding the level of an inflation target, while most countries have set their inflation target in the single-digit range when implementing inflation-targeting, the question arises as to why the Central Bank has a 22% inflation rate (with +/- 2%) as its inflation target at the beginning of inflation targeting? The results of the report indicate that according to the macroeconomic conditions of the country, the continuation of economic sanctions, the degree of financial dominance, the financial situation of the government, and the current inflationary conditions, the Central Bank should declare the inflation rate as an inflation target, and be sufficiently confident that can achieve the inflation target according to the current conditions and future forecasts in the time horizon. The 22% target for inflation is an explicit short-term (one-year) target in line with an implicit long-term target in the single-digit range. Also, to complete the operational mechanism of implementing monetary policy in the framework of inflation targeting, the Central Bank in June has created an interbank interest rate corridor as a policy interest rate.
The report also emphasizes the monetary policy decision-making structure in the context of inflation targeting: Over the past three decades, the group decision-making model has mostly prevailed in the Monetary Policy Committee. At present, in Iran, the Monetary and Credit Council practically plays the Monetary Policy Committee's role, which according to global experience, it seems necessary to change the composition of the Monetary and Credit Council in a way that strengthens the weight of the Central Bank officials.
"Given that transparency and efficient interaction with the general public is an important factor in the success of the inflation-targeting framework, the Central Bank needs to use the communication tools used by other inflation-targeting central banks to anchor inflation expectations better," the report said. In this regard, the most important communication tool is the quarterly publication of the "Inflation Report." In addition to explaining the rationale for monetary policy decisions, the content of this report should include the Central Bank's assessment of economic conditions and its forecast of inflation and economic growth and other key variables over different time horizons. Also, in this report, the risks associated with the deviation of the inflation rate and the economic growth rate from the projected values should be examined under different scenarios.
Those interested in accessing the full text of this policy report can refer to the portal of the Monetary and Banking Research Institute of the Central Bank at http://mbri.ac.ir