According to the latest official report from the Iranian regime’s Statistical Center, the inflation rate in February has broken the record for the past 12 months, with the monthly inflation rate surpassing 4% for the first time in a year.
Beyond this year’s inflation, data extracted from reports indicate a continued rise in inflation during the first six months of the next year. This suggests that the value of the U.S. dollar will continue to increase against the Iranian rial, as one of the fundamental methods for calculating the intrinsic value of the dollar is based on the difference in inflation rates between Iran and the U.S.
Consumer Price Index (CPI)
According to the latest report from Iran’s Statistical Center on February inflation, the prices of goods and services used by the public have increased by 4.1% compared to November 2024. This level of price surge has been unprecedented in the past year.
The report also states that year-on-year inflation stands at 35.3%, meaning that households across the country have had to spend, on average, 35.3% more than in February 2024 to purchase the same set of goods and services.
According to the official report from Iran’s Statistical Center, the prices of food items—especially vegetables, dried fruits, and fresh fruits—have increased more than other goods and services. This indicates that the burden of inflation is felt most by low-income households. The fact that inflation in rural areas has outpaced that of urban areas further confirms this reality.
Data from Iran’s Statistical Center show that inflation in rural areas has reached 36%, compared to 35.2% in urban areas.
Producer Price Index (PPI)
Producer inflation measures price changes from the perspective of producers (rather than consumers) and is usually considered a leading indicator for future consumer inflation.
Iran’s Statistical Center reported that producer inflation in January was even higher than consumer inflation in February. This signals rising production costs, which will eventually be passed on to consumers, leading to reduced profit margins and, ultimately, more inflation and price increases in the coming months.
Data from Iran’s Statistical Center indicate rising producer inflation across all sectors, including industry, mining, and agriculture. In January, producer inflation in the mining sector reached 33%, while the general inflation rate in the industrial sector stood at 36.9%. The agricultural sector experienced a sharp increase of 11.4 percentage points, bringing its inflation rate to 38%.
Liquidity Growth
A recently published report on the Iranian regime’s Central Bank website shows that the total liquidity volume reached 9,723 trillion tomans by the end of January, marking a 23.4% increase. This means that the liquidity growth in just the first ten months of this year is nearly equal to the total liquidity of the country by the end of 2018.
Despite the 23.4% liquidity growth in January, this figure increased further in February, reaching 27.4%. This accelerating growth, combined with the severe production crisis caused by frequent power outages and structural issues, signals a worsening inflationary trend in the coming year.
Budget Deficit and Rising Government Debt
Ebrahim Bahadorani, senior advisor to the Tehran Chamber of Commerce, has estimated the operational budget deficit for 2025 at approximately 1,805 trillion tomans. He made this estimate in November 2024, before Donald Trump had threatened Iran with a severe reduction in oil sales. Given the current inflation rate and the high likelihood of Trump’s threats materializing—along with intensified U.S. oil and financial sanctions—it is highly probable that a significant portion of the government’s projected revenues in the 2025 budget will not be realized, further exacerbating the already massive budget deficit.
Moreover, government debt has increased by 32% compared to the same month last year. The government, failing to meet its projected revenues, is pressuring banks for funding, leading to higher liquidity, inflation, and ultimately rising prices across the economy.
Data from the Central Bank indicate that the government’s revenue constraints—particularly in oil sales—have forced it to rely on banks and, ultimately, the Central Bank for funding. In response, the Central Bank has resorted to printing money.
Calculating the Dollar Exchange Rate with an Optimistic Inflation Estimate
The factors mentioned in this report strongly indicate rising inflation in the coming year, which in turn suggests a rise in the exchange rate of the U.S. dollar. One method for estimating the real value of the dollar is to use the difference between inflation rates in Iran and the U.S.
Using this method, if U.S. inflation is assumed to be 3.1% and Iran’s average inflation rate in the first half of the Iranian calendar year (starting March 21) is optimistically estimated at 37%, with the exchange rate at 930,000 rials per dollar by the end of this year, then adding the inflation differential of 33.9% to the current exchange rate gives an estimated intrinsic dollar value of 1,245,000 rials in the coming year.
This is a staggering figure, which will undoubtedly be influenced by whether negotiations between Iran and the U.S. take place, as well as by the Central Bank’s policies. Depending on next year’s inflation rate and the exchange rate at the end of this year, the time required to reach this projected rate may vary.
