The Monetary Policy Committee of the Central Bank has maintained the policy rate constant at 37%.
The committee also kept the overnight lending rate at 40% and the overnight borrowing rate at 35.5%.
The decision was in line with the expectations of economists and the market amid rising fuel and energy prices following Iran's closure of the Strait of Hormuz in response to the US and Israel's war against it.
In its announcement regarding interest rates, the Central Bank noted that indicators point to a slowdown in economic activity:
"The underlying trend of inflation declined in March. Leading indicators suggest a slight increase in the underlying trend in April. Amid geopolitical developments and the resulting uncertainties, energy prices remain elevated and exhibit notable volatility. The effects of these developments and domestic energy prices on the inflation outlook through the cost channel and economic activity are being closely monitored. While indicators point to a slowdown in economic activity, potential second-round effects of recent developments on the inflation outlook will be of importance.
"The tight monetary policy stance, which will be maintained until price stability is achieved, will strengthen the disinflation process through demand, exchange rate, and expectation channels. The Committee will determine the policy rate by taking into account realized and expected inflation and its underlying trend in a way to ensure the tightness required by the projected disinflation path in line with the interim targets. Monetary policy decisions are made prudently on a meeting-by-meeting basis with a focus on the inflation outlook. In case of a significant and persistent deterioration in the inflation outlook, which can also be driven by the recent developments, monetary policy stance will be tightened. The Committee reiterated that it remains highly attentive to upside risks on inflation.
"In case of unanticipated developments in credit and deposit markets, monetary transmission mechanism will be supported via additional macroprudential measures. Liquidity conditions will continue to be closely monitored and liquidity management tools will continue to be used effectively.
"The Committee will make its policy decisions so as to create the monetary and financial conditions necessary to reach the 5 percent inflation target in the medium term. The Committee will make its decisions in a predictable, data-driven and transparent framework."
(HA/VK)
