Last updated Changes in the inflation rate in Iran from 1325 to 1396 Solar Hijri, based on official statistics from the Central Bank of the Islamic Republic of Iran. The horizontal axis represents the year, and the vertical axis represents the inflation rate of that year in percent.
According to BBC Persian, the most fundamental structural cause of inflation in Iran’s economy is the government budget deficit. Traditionally, budget deficits have been financed through government borrowing from the Central Bank of Iran and money printing, a process that increases the monetary base and leads to rapid growth in liquidity, ultimately intensifying inflation.[2][3]
Other factors affecting inflation include increased risk in productive activities, weak macroeconomic management, particularly mismanagement of the exchange rate, and depreciation of the national currency. Economic analysts consider chronic inflation a long-term phenomenon in Iran’s economy and describe it as one of the country’s most serious economic and social problems.[4][3]
According to the Statistical Center of Iran, annual inflation reached 36.3% during July, August 2025. This rate varied among expenditure deciles from 35.8% (tenth decile) to 36.8% (first decile). In April, May of the same year, annual inflation was 37%, representing a 1.8 percentage-point decrease compared to March, April.[5]
Based on international data, Iran ranks among the countries with the highest inflation rates. According to Trading Economics, inflation in Iran increased from 37.1% in March 2025 to 38.9% in April 2025.[3]
By late 2025, inflation in Iran, driven by sharp increases in food prices, led to a nationwide food crisis. The collapse of the national currency, import shortages, drought, and reduced consumption prompted experts and politicians to warn of famine and social unrest.[7][8][9]
Latest inflation rate
According to reports by the Statistical Center of Iran, inflation in May, June 2025 was as follows:
Annual inflation: 34.5%
Point-to-point inflation: 39.4%
Monthly inflation: 3.3%
These figures indicate that inflation in Iran remains at a high level, and point-to-point inflation shows continued price pressure in recent months. Rising prices of essential goods, exchange rate fluctuations, and production costs are among the main contributing factors.[10][11]
Inflation indices
Consumer Price Index (CPI)
Consumer Price Index (CPI) is a statistical measure used to track changes in the average prices of a basket of consumer goods and services over time.[12]
In Iran, CPI is published by the Statistical Center of Iran and includes a representative basket of household consumption goods and services. Reports are published monthly, from which annual and point-to-point inflation rates are calculated.
Table 1: Consumer Price Index by year
Year
CPI (2010=100)
Annual inflation (%)
2021
242.4
40.19
2022
249.3
43.49
2023
327.3
44.58
2024
333.9
32.5
2025
378.9
29.5
Producer Price Index (PPI)
Producer Price Index (PPI) measures changes in the average prices received by producers for goods and services. It reflects inflationary pressures at the production level and is often considered a leading indicator of consumer inflation.
In Iran, PPI is published by the Statistical Center of Iran and covers sectors such as Industry, Agriculture, and Services.[13]
History
Annual inflation rate in Iran
The inflation rate in Iran has experienced significant fluctuations since the 1970s. In the 1970s, inflation was relatively low and controlled, but after the Iranian Revolution of 1979 and the Iran–Iraq War, inflation increased sharply due to economic shocks and fiscal and monetary policies. In the following decades, changes in the exchange rate and government economic policies caused severe inflationary volatility, and from the 2010s onward, chronic inflation above the global average has persisted.[14][15][16]
Inflation before the 1979 Revolution
The inflation rate in Iran before the 1979 revolution was highly volatile. According to available data, inflation in some years exceeded 100%, while in others it was around one to two percent. These fluctuations were mainly caused by economic changes, monetary policies, and price volatility of goods and services. The peak of these fluctuations occurred during World War II and the occupation of Iran by the Allies, which led to shortages and liquidity growth. Consequently, the inflation rate from 1941 to 1943 reached unprecedented levels.[17]
In the 1960s, the inflation rate in Iran was very low and even negative in some years. The average annual inflation rate in the pre-revolution period (1951–1979) was reported at approximately 9.6%.[18] With the start of the 1970s and rising government spending, the inflation rate increased sharply, reaching about 16.6% in 1976 and around 25% in 1977.[19]
After the 1979 revolution, Iran's inflation rate followed an increasing and volatile trend. Data from the Central Bank of Iran shows that inflation peaked during the 1980s under the impact of the Iran–Iraq War and economic shocks, and continued to fluctuate significantly in subsequent decades.
In the early years after the revolution, inflation was relatively controlled. Inflation was about 10% in 1979 and 11.4% in 1980; however, with the start of the Iran–Iraq War in 1981, it rose to 22.5%. In the 1980s, inflation initially rose to about 30%, then fell mid-decade to approximately 6.9% in 1985, before rising again to 28.9% in 1988.[21] In the 1990s, with the implementation of economic adjustment policies, inflation surged to 49.4% in 1995, one of the highest levels in Contemporary history of Iran, then dropped to about 23.2% in 1996.[22][23]
The long-term average inflation rate in Iran from 1960 to 2021 was around 16%. However, inflation in the 2010s was reported to be more fragile and unstable than in previous periods. Analysis of point-to-point inflation and average inflation in Iran from 2012 to January 2023 shows the major economic shifts during this period.
Influencing Factors
Inflation in Iran's economy is affected by a combination of domestic and external factors, as outlined below:
Fiscal and Budgetary Policy
Structural Budget Deficit
Iran's chronic government budget deficit, especially when financed directly or indirectly through the Central Bank of Iran, is considered one of the most important structural causes of inflation.[27] Each time the government resorts to borrowing from the central bank to cover the budget deficit, this action increases the monetary base and, through the banking system’s multiplier effect, significantly expands liquidity, creating strong inflationary pressure.[28]
Moreover, many structural causes of the budget deficit, such as the economy's dependence on unstable oil revenues, inefficiencies in the tax system, imposed subsidy costs, and lack of transparency in resource and budget allocation, have pushed Iran’s economy into a vicious cycle of budget deficit and inflation.[29]
Economic experts have stated that this vicious cycle — budget deficit → borrowing from the central bank → liquidity growth → inflation → worsening deficit — can only be broken through genuine structural reforms in budgeting, taxation, and public spending.[28]
Role of Taxes in Budgeting and Inflation Control
The head of Iran’s Tax Administration has stated that all economists, regardless of their orientation, agree that the best way to finance the government budget is through taxation; compared to other methods such as money printing or borrowing, it imposes the least inflationary pressure on the economy and the public.[30]
In developed countries, the share of taxes in government budgets is usually more than 30%, while in Iran, this ratio has been reported to be less than 10% of GDP.[31] This structure increases Iran’s dependence on non-tax revenue and complicates inflation management.
Economic analysts believe that reforming the tax system, reducing exemptions, and increasing the share of direct taxes can help reduce long-term inflationary pressures and provide sustainable revenue for the government budget.[32]
Role of Economic and Military Institutions
Economic analyses indicate that economic institutions and large organizations, especially military and paramilitary institutions such as the IRGC, play an important role in Iran’s inflation. These institutions are active in various sectors of the economy, including agriculture, food supply, industries, and essential goods imports.[33]
The widespread influence of these institutions in Iran’s economy can lead to structural problems, including:
Limiting competition and market efficiency in sectors controlled by these institutions.
Creating barriers for the private sector and independent investment, reducing production and increasing costs.
Influencing the supply chain of goods and raw materials, accelerating price increases and inflation.[34]
Studies show that the presence of military institutions in the economy, along with mismanagement and limited financial transparency, can exacerbate inflationary pressure and reinforce the cycle of budget deficit and liquidity growth.[35]
Monetary Policy and Liquidity
High Liquidity Growth
Liquidity growth in Iran, especially resulting from expansionary monetary policies and government borrowing from the central bank, is one of the main causes of inflation. Research shows that the contribution of liquidity growth to inflation reaches about 32.58%.[36]
The increase in liquidity occurs through government borrowing from the central bank and expansionary monetary policies of the central bank. This process stimulates aggregate demand and, in the long term, if production growth is insufficient, leads to inflation and depreciation of the national currency.[37]
By the end of 2023 (1402), liquidity volume reached about 79 quadrillion rials (133 billion USD), also reinforcing inflationary expectations.[38]
Controlling inflation requires managing the budget deficit, controlling liquidity, and implementing structural reforms in budgeting and production.[39]
Exchange Rate and Currency Policy
Exchange Rate Fluctuations
Exchange rate fluctuations, especially increases, affect the price of imported goods, raising production costs and, consequently, inflation.[40] Rising exchange rates increase the cost of imported intermediate and capital goods, ultimately raising production costs. This directly contributes to higher prices for goods and services in the domestic market.[41]
Official reports indicate that following exchange rate spikes in recent years, the share of imported goods in household consumption has been significantly affected. For example, the dollar rate increase in 2018 (1397) and afterward led to a substantial rise in the prices of essential goods, including food and medicine.[42]
Economic experts also believe that the high dependence of domestic production on imported inputs and equipment makes any instability in the currency market quickly translate into structural inflation.[43]
International Economic Sanctions
International sanctions reduce foreign currency revenues, increase import costs, and decrease the supply of goods, all of which lead to higher prices and inflation.[44] International economic sanctions against Iran, particularly in banking, oil, and trade sectors, have limited foreign currency resources and reduced imports of essential and capital goods. These restrictions have increased production costs and put pressure on domestic prices, thereby intensifying inflation.[45]
Analyses indicate that sanctions not only increase the prices of imported goods but also affect inflation expectations of economic actors. For instance, anticipating continued sanctions leads households and businesses to stockpile goods, currency, and gold, which contributes to additional inflationary pressure.[46]
Furthermore, currency restrictions and reduced government foreign exchange revenues due to sanctions have increased the budget deficit and borrowing from the central bank, thereby reinforcing the inflationary cycle.[47]
Psychological-Behavioral Factor
Inflation Expectations
Uncertainty regarding economic and political policies increases inflation expectations in society, which in turn raises demand and consequently drives up prices.[48] One of the key factors intensifying inflation in Iran is inflation expectations. When economic actors and households anticipate that the general price level will rise in the future, they are more inclined to convert cash assets into goods, foreign currency, or other investments. This behavior itself increases demand, leading to further price growth.[49]
According to the Central Bank, inflation expectations in recent years have been influenced by factors such as exchange rate fluctuations, budget deficits, and expansionary monetary policies. This has caused prices to continue rising even during periods when the actual inflation rate has decreased.[50]
Research studies also indicate that inflation expectations can create a "self-reinforcing cycle," meaning that the anticipation of price increases triggers inflationary behaviors, which in turn reinforce future inflation.[51]
Social and Political Impacts
High inflation in Iran has broad social and political consequences, significantly affecting people’s daily lives and social structures. These impacts include the following:
Reduced Purchasing Power: Continuous price increases reduce household purchasing power and lower overall welfare. People face declining real incomes, and the costs of essential living expenses such as food, housing, and services rise sharply.[52]
Increased Inequality: Inflation disproportionately benefits wealthy groups and capital owners while placing greater pressure on low-income populations. This situation can exacerbate class divides and economic inequality.[53]
Increased Social Instability and Protests: Economic pressures caused by inflation raise public dissatisfaction and can lead to social unrest. High inflation, especially in essential goods, may trigger street demonstrations and protests.[54]
Impact on Policies and Public Trust: Rising inflation can reduce public trust in economic policies and government institutions, increasing political pressure on officials. Ineffective policies or a lack of financial transparency contribute to worsening this distrust.[55]
Consequences
Inflation in Iran has had multiple economic and social consequences, significantly affecting people’s lives. Rising inflation in Iran has had deep impacts on various aspects of social and economic life. These effects include reduced purchasing power, increased poverty, decreased social capital, higher unemployment, brain drain, higher rates of divorce and suicide, and reduced political participation.[56]
According to reports, the poverty rate in 2023 reached 30.1% of Iran’s population. This rising inflation has reduced people’s purchasing power and increased poverty. Additionally, unemployment among youth and university graduates is higher than the global average.
The devaluation of the national currency and rising inflation have decreased purchasing power and increased living costs. These economic conditions have led to reduced public trust in the government and lower political participation in elections.[57]
These economic and social conditions can lead to social collapse and reduce the society’s resilience to crises.
Reduced Purchasing Power and Rising Poverty Line
Rising inflation has reduced household purchasing power, especially among low-income deciles. According to the Parliament Research Center, the poverty line for a four-member household in Tehran increased from about 2.5 million IRR in 2017 to over 10 million IRR in 2021, indicating a more than 300% increase over 4 years.[58] This rise in the poverty line indicates reduced household welfare and increased economic pressure on low-income groups. Simultaneously, the share of food in household expenses has increased, and daily calorie intake has declined, reflecting a lower quality of life.[59]
Data analysis shows that although nominal incomes of urban households rose significantly from 2011 to 2023, real income (adjusted for inflation) grew much less. For example, real urban household income increased only about 16.3% during this period, indicating that inflation rose faster than incomes.[60] According to the Parliament Research Center, the national average poverty line in 2021 for a single person was around 1,680,000 IRR, and for a four-person household approximately 4,500,000 IRR. The absolute poverty rate in 2021 was reported at 30.4% of the population.[59] By 2023, this poverty rate reached approximately 30.1%, meaning over 25 million people in Iran live below the poverty line.[61]
Rising Social Inequality
Inflation and economic problems have increased social inequalities, disproportionately affecting vulnerable groups. This rising inequality exacerbates class gaps and reduces equal opportunities for different segments of society.[62]
Rising Social Harms
Data from Statistical Center of Iran shows that over the past decade, social harms such as violence, theft, domestic abuse, etc., have increased. Economic instability, rising poverty, and inequalities are contributing factors.[63]
These conditions have been described as a "tsunami of social harms," including factors such as poor employment structure, economic inequality, and low cultural capital, threatening social life and societal sustainability.[64]
International reports have also described Iran’s social harm situation as alarming, citing rising suicide rates and the spread of related social crises.[65]
Social Dissatisfaction and Unrest
Inflation and economic problems have increased social dissatisfaction and, in some cases, led to civil unrest. These grievances can lead to more public protests and reduced trust in government institutions.[66]
Inflation and economic challenges have fueled public discontent in Iran. Under these conditions, various social groups, especially retirees, oil and gas sector workers, teachers, and merchants, have protested to claim their livelihood rights.[67]
These protests indicate public anger over widespread price increases, ineffective crisis management, and the falling value of the national currency; these factors can escalate small protests into a larger social movement.[67]
Low public trust in government institutions is also evident. Reports show that in 2023 only about 20% of people trusted the parliament, 30% the judiciary, and 27% the government. Many citizens perceive the government as failing to manage inflation, reduce poverty, and enforce laws, weakening the social bond between the state and the people.[68]
In late 2025, Iran’s economy faced severe pressures with unprecedented currency fluctuations, a sharp drop in the rial’s value, and accelerating inflation; the US dollar reached approximately 145,000 IRR. During this period, runaway inflation exceeded 40%, and by December 2025, annual inflation officially reached 42.2%, while food prices rose 72%, severely reducing business profitability.[69][70][71]
On 27 December 2025, protests began with strikes by merchants in Aladdin Passage and Charsoo Bazaar in Tehran in response to sharp currency fluctuations and economic instability.[72][73] The protests later spread to other provinces and became the largest anti-government demonstrations since the 2009 elections.[74][75][76][77]
Devaluation of the National Currency
Iran’s National Currency and Dollar Comparison — History and Impact on Inflation
The devaluation of Iran’s national currency (rial) against the US dollar is a major factor intensifying price pressures, especially on imported goods and food. From 2015 to 2025, the rial experienced a general decline with periods of spikes and temporary crashes.
In the mid-2010s (after the 2015 nuclear deal and before the return of sanctions), the free market rate was around 27,000–32,000 IRR per USD; historical sources confirm this.[78]
From 2018, after sanctions intensified and economic instability worsened, the rial repeatedly fell, and official and free market rates diverged, further increasing price pressures.[79]
In early 2025, the rial fell to unprecedented levels; news reports cited free market rates reaching historical records, e.g., Reuters reported around 1,039,000 IRR per USD in March 2025.[80]
AP News and other agencies confirmed the rial’s collapse, reporting historical rates exceeding 500,000–1,000,000 IRR per USD in early 2025.[81]
Approximate Changes in Iran’s Free Market Dollar Rate (2015–2025)
Year
Approx. Rate (IRR/USD)
Notes and Events
2015
30,000
After the nuclear deal and relative easing of sanctions, the free market rate stabilized.[82]
2017
37,000
Continued relative stability before the return of sanctions.[83]
Unprecedented rial collapse to over one million per USD.[87][88]
Connection Between Rial Value, Inflation, and Food Prices
The devaluation of the national currency has multiple effects on inflation, especially food inflation:
A lower rial value increases the cost of importing inputs and intermediate goods (including fertilizers, pesticides, livestock feed, and agricultural machinery), which directly raises the cost of food production.
Rial depreciation strengthens inflation expectations; when households and economic actors anticipate further price increases, they tend to convert rial assets into dollars, gold, or goods, which in turn raises demand for products and creates price pressures.
A falling rial reduces households’ real purchasing power; therefore, even wage increases often occur with delays or below the rate of price growth, reducing welfare and access to food. For overall statistical evidence on the relationship between currency depreciation and rising inflation in recent periods, one can refer to consumer price index data and international and news reports.[89]
Iran has faced severe food inflation over the past decade, influenced by multiple factors. These include agricultural and water resource challenges, climate change, inefficient resource management, and issues related to the food supply chain.[90]
In recent months, Iran has experienced accelerating inflation, particularly in the food sector. Statistical data show that the inflation rate in the "food and beverages" category during this period has been significantly higher than general inflation, and price increases for items such as oil, dairy products, rice, and meat have placed considerable pressure on household living costs.
One of the main drivers of recent inflation has been the sharp decline in the value of the rial against the US dollar. The free market exchange rate, reported at about 80,000 IRR at the beginning of the year, rose in subsequent months to levels above 120,000–130,000 IRR. This depreciation of the national currency, through higher import costs of final goods and production inputs, especially in the food sector, has contributed to rising general price levels.[91]
In addition to exchange rate fluctuations, factors such as rising production costs, dependence on imported inputs, reduction or removal of certain subsidies, and domestic supply constraints have contributed to the rapid increase in food prices. Analytical reports indicate that the combination of these factors has intensified short-term but widespread inflation in essential goods markets.[92]
Overall, existing evidence shows that recent food inflation in Iran results from the interaction of sharp currency fluctuations, domestic economic policies, and structural constraints in production and distribution, reducing household purchasing power.
Role of Economic Institutions
A major factor is the involvement of institutions such as the Islamic Revolutionary Guard Corps in the economy, particularly in agriculture and the food sector. The influence of these institutions, combined with mismanagement and corruption, has exacerbated problems in water resources and agricultural production methods.[93]
Food Inflation Rate
According to the latest World Bank report in April 2025, Iran ranks second globally in food price inflation, with a rate of 40.8%.[94]
Compared to the previous year, the food inflation rate has decreased significantly. In May 2023, the food inflation rate was 77.5%, which fell to about one-third over one year.[95]
Factors Affecting Food Inflation
Several factors contribute to food inflation:
Agricultural and Water Resource Challenges: Water scarcity and climate change have reduced agricultural production and increased production costs.[96]
Inefficient Resource Management: Mismanagement in resource allocation and inadequate planning in agriculture and food supply have caused problems in the supply chain.[97]
Military Influence in the Economy: The involvement of institutions such as the IRGC in economic sectors, especially agriculture and food supply, has created challenges.[98]
Economic Policies and Sanctions: International sanctions and domestic economic policies have negatively affected food production and imports, creating inflationary pressure.[99]
Global Food Inflation Status
Globally, Iran ranks among the highest in food inflation. In April 2025, Zimbabwe had the highest rate at 102.9%, with Iran in second place.
Policies and Responses
Monetary Policies of the Central Bank of Iran
The Central Bank of the Islamic Republic of Iran in recent years has implemented several monetary policies to manage inflation and control the exchange rate:
Open Market Operations: Since 2019, the Central Bank has been managing the monetary base and interbank interest rates by buying and selling government securities in the open market.[100]
Interbank Interest Rate: The Central Bank controls short-term interest rates by setting an interbank rate corridor between 23% and 24%.[101]
Foreign Exchange Market Intervention: The Central Bank reduces severe exchange rate fluctuations by supplying currency and adjusting official rates.[102]
Exchange Rate Stabilization: Exchange rate policies include setting official rates and managing supply and demand to prevent severe currency fluctuations.[103]
Responses and Challenges
Exchange Rate Volatility: Despite interventions, the exchange rate has experienced severe fluctuations at times.
Impact of Sanctions: International sanctions have created challenges for policy implementation.
Inflation Expectations: The inflation expectations of the public and economic actors affect the effectiveness of these policies.
International Comparison
In 2025, Iran's inflation rate compared to neighboring countries and countries with high inflation is as follows:
Table note: Inflation rates represent the annual percentage change in the Consumer Price Index (CPI) in 2025.
Inflation and the Future of Iran's Economy
Iran's economic outlook in the short and long term faces multiple challenges. Some economic analysts attribute the current problems to inefficient fiscal and monetary policies, chronic budget deficits, dependence on oil revenues, and lack of structural reforms in the economy.[118]
Short-Term Outlook
In the short term, high inflation is expected to continue, and economic growth is likely to be limited or negative. Factors such as increasing liquidity, ineffective support policies, and international sanctions put additional pressure on the economy. Some economic analysts have reported that the involvement of military institutions, including the Islamic Revolutionary Guard Corps, in nuclear and security policies, as well as the deadlock in international negotiations, has directly contributed to the intensification of sanctions and the restriction of economic growth opportunities.[119][120]
Long-Term Outlook
Economic analysts believe that some of the long-term problems are due to the intervention of governing institutions, including the Islamic Revolutionary Guard Corps and other security and military forces, in economic policies and ownership of large state-owned companies and projects. Such interventions can limit competition, reduce transparency, and decrease the effectiveness of economic policies.[121]
Without structural reforms and the reduction of inefficient government and military interventions, sustainable economic growth will be limited. Experts emphasize the need to review budgetary, fiscal, and currency policies.[122]
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