Committee wants Iran's lending rate firm at 12%

Tehran: Iran's government economic committee which draws up monetary policy has called for keeping bank lending rates at 12 per cent, Iranian media reported on Thursday , well below the level inflation.

The rate must be approved by President Mahmoud Ahmadinejad, who has called for low interest rates and said those who oppose cutting rates should "step aside". A minister said higher rates would hurt job creation and stifle investment.

The central bank had proposed setting interest rates at three per cent above inflation, which is currently running at more than 20 per cent. Econ-omists say low interest rates, combined with government spending largesse, have fuelled price rises.

"The interest rate again at 12 per cent," the economic newspaper Donya-ye Eqtesad said, adding the rate was ratified by the economic committee but needed presidential approval.

"An additional reduction in a decree by the president has not been ruled out," the newspaper added.

Other Iranian media also said a formal announcement had yet to be made.

Officials often refer to "profit" rates for banks because of Iran's adherence to Islamic codes barring interest but economists say there is little practical difference.

The president, who came to power in 2005 vowing to share out Iran's oil wealth, surprised some economists last year by calling for state bank lending rates to be cut to 12 per cent from 14 per cent. A now dissolved monetary body approved it.

Shortly after, the central bank governor was replaced after analysts said he had differed with the president over interest rate policy.