According to the last announcement of CBI, banks were obliged to set the maximum 15 percent interest rate on one-year deposits and also maximum 10 percent on short-term deposits. This announcement is applicable for banks from 1st September 2017. In addition to bank deposits, the mentioned decision which has been made by CBI leads to significant decline in effective interest rate on bonds and it has been decreased from 22 percent to 16 percent on average.

CBI has completed the mentioned policy in order to support domestic production but this policy could put Iran’s economy in trouble. Before Iran’s 10th presidential election, the economy of Iran has experienced high inflation and regarding this official decided to increase interest rate on deposits by decreasing the velocity of money, this occurrence leads to significant decline in inflation rate. Therefore, the mentioned decision leads to significant increase in liquidity from 6,395 thousand billion Rial to 12,533 thousand billion Rial. However, cutting interest rate may guide the liquidity to other markets rather than banks and this issue might cause hyperinflation in the economy, so the CBI is interfering in interbank market and decrease the lending rate from 34 percent to 18 percent. This intervention could help for better implementation of the latest policy by CBI.

The economic decision makers in Iran had more than 5 years to provide the necessary ground for economic growth, in the first step the officials have postponed the maturity date of the government debts by issuing Treasury Bills and through this they had more time in order to attract Investment in Infrastructure but it seems the investments which have been made since beginning of Dr.Rouhani’s presidency 5years ago were not as forecasted and the current value of investments couldn’t boost the economic growth. The mentioned occurrence may cause inflation in the remaining years till the end of Rouhani`s presidency and the officials should act more effective to prevent inflation.

To conclude, it seems that the optimum way for cutting interest rate internationally is different from what happened in Iran. It seems that the Central Bank of Iran should Improve the business environment for banks and banks should modify their management structures. The proposed model brings more flexibility for banks against monetary policies and helps the government to find a solution for boosting economic growth in order to preventing high inflation.