Inflation

WASHINGTON — White House officials were caught by surprise when a post appeared Sunday night on the Federal Reserve’s official social media channel, with Jerome Powell, its chairman, delivering a plain and clear message.

President Trump was not only weaponizing the Justice Department to intimidate him, Powell said to the camera, standing before an American flag. This time, he added, it wasn’t going to work.

The lack of any warning for officials in the West Wing, confirmed to The Times, was yet another exertion of independence from a Fed chair whose stern resistance to presidential pressure has made him an outlier in Trump’s Washington.

Powell was responding to grand jury subpoenas delivered to the Fed on Friday related to his congressional testimony over the summer regarding construction work at the Reserve.

“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the president,” Powell said.

“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions,” he added, “or whether instead monetary policy will be directed by political pressure or intimidation.”

For months, Trump and his aides have harshly criticized Powell for his decision-making on interest rates, which the president believes should be dropped faster. On various occasions, Trump has threatened to fire Powell — a move that legal experts, and Powell himself, have said would be illegal — before pulling back.

The Trump administration is currently arguing before the Supreme Court that the president should have the ability to fire the heads of independent agencies at will, despite prior rulings from the high court underscoring the unique independence of the central bank.

The decision by the Justice Department to subpoena the Fed over the construction — a $2.5-billion project to overhaul two Fed buildings, operating unrenovated since the 1930s — comes at a critical juncture for the U.S. economy, which has been issuing conflicting signals over its health.

Employers added only 50,000 jobs last month, fewer than in November, even as the unemployment rate dipped a tenth of a point to 4.4%, for its first decline since June. The figures indicate that businesses aren’t hiring much despite inflation slowing down and growth picking up.

The government reported last month that inflation dropped to an annual rate of 2.7% in November, down from 3% in September, while economic growth rose unexpectedly to an annual rate of 4.3% in the third quarter.

However, the long government shutdown interrupted data collection, lending doubt to the numbers. At the same time, there is uncertainty about the legality of $150 billion or more in tariffs imposed on China and dozens of countries through the International Emergency Economic Powers Act, which has been challenged and is under review by the Supreme Court.

As inflation has cooled, the Fed under Powell has incrementally cut the federal funds rate, the target interest rate at which banks lend to one another and the bank’s primary tool for influencing inflation and growth. The Fed held the rate steady at a range of 4.25% to 4.5% through August, before a series of fall cuts left it at 3.5% to 3.75%.

That hasn’t been enough for Trump, who has called for the rate to be lowered faster and to a nearly rock bottom 1%. The last time the central bank dropped the rate so low was in the dark days of the early pandemic in March 2020. It began raising rates in 2022 as inflation took off and proved stubborn despite the bank’s efforts to rein it in.

Mark Zandi, chief economist at Moody’s Analytics, said there is room to continue lowering the federal funds rate to 3%, where it should be in a “well functioning economy, neither supporting or restraining growth.”

However, muscling the Fed to lower rates and reduce or destroy its independence is another matter.

“There’s no upside to that. It’s all downside, different shades of gray and black, depending on how things unfold,” he said. “It ends in higher inflation and ultimately a much diminished economy and potentially a financial crisis.”

Zandi said much will hinge on the Supreme Court’s decision on whether Trump can remove Federal Reserve Governor Lisa Cook, which he sought to do last year, citing allegations of mortgage fraud she denies.

While Powell’s term as chairman ends in May, his term as a governor — influencing interest-rate decisions — extends to January 2028. A criminal indictment over the construction project could provide Trump the legal justification he needs to remove him altogether.

“When he steps down in May, will he stay on the board or does he leave? That will make a difference,” Zandi said.

A key issue will be how much independence the Fed retains, he said, given the central bank’s role in establishing the U.S. as a safe haven for international bond investors who play a key role funding the federal deficit.

The investors rely on the bank to keep inflation under control, or they will demand the government pay more for its long term bonds — though the subpoenas had little effect so far Monday on bond prices.

“There are scenarios where the bond market says, ‘Oh my gosh, we’re going to see much higher inflation, and there’s a bond sell-off and a spike in long-term rates,” he said. “That’s a crisis.”

Zandi said that even if the worst-case scenarios don’t play out, it will take time for the Federal Reserve to reestablish its reputation as an independent bank not influenced by politics.

“I’m not sure investors will ever forget this,” he said. “Most importantly, it depends on who Trump nominates to be the next chair of the Federal Reserve — and how that person views his or her job.”

Lawmakers from both parties have questioned the motivation behind the investigation.

North Carolina Sen. Thom Tillis, a Republican member of the Senate Committee on Banking, Housing and Urban Affairs, has said he plans to oppose the confirmation of any nominee for the Fed until the legal matter is “fully resolved.”

“If there were any remaining doubt whether advisers within the Trump administration are actively pushing to end the independence of the Federal Reserve, there should now be none,” Tillis wrote in a social media post.

Sen. Elizabeth Warren, the top Democrat on that committee, accused Trump of trying to “install another sock puppet to complete his corrupt takeover of America’s central bank.”

“Trump is abusing the authorities of the Department of Justice like a wannabe dictator so the Fed serves his interests, along with his billionaire friends,” Warren said in a statement.

Rep. French Hill (R-Ark.), the chairman of the House Financial Services Committee, also expressed skepticism about the inquiry, which he characterized as an “unnecessary distraction.”

“The Federal Reserve is led by strong, capable individuals appointed by President Trump, and this action could undermine this and future Administrations’ ability to make sound monetary public decisions,” Hill wrote in a statement.

As Hill raised concerns about the investigation, he added he personally knew Powell to be a “person of the highest integrity.”

House Speaker Mike Johnson (R-La.), meanwhile, dismissed the idea that the Justice Department was being weaponized against Powell. When asked by a reporter if he thought that was the case, he said: “Of course not.”

Times staff writers Wilner and Ceballos reported from Washington and Darmiento from Los Angeles.

HOUMA, La. — For nearly 50 years, James Blanchard has made his living in the Gulf of Mexico, pulling shrimp from the sea.

It’s all he ever wanted to do, since he was around 12 years old and accompanied his father, a mailman and part-time shrimper, as he spent weekends trawling the marshy waters off Louisiana. Blanchard loved the adventure and splendid isolation.

He made a good living, even as the industry collapsed around him. He and his wife, Cheri, bought a comfortable home in a tidy subdivision here in the heart of Bayou Country. They helped put three kids through college.

But eventually Blanchard began to contemplate his forced retirement, selling his 63-foot boat and hanging up his wall of big green fishing nets once he turns 65 in February.

“The amount of shrimp was not a problem,” said Blanchard, a fourth-generation shrimper who routinely hauls in north of 30,000 flash-frozen pounds on a two-week trip. “It’s making a profit, because the prices were so low.”

Then came President Trump, his tariffs and famously itchy trigger finger.

Blanchard is a lifelong Republican, but wasn’t initially a big Trump fan.

In April, Trump slapped a 10% fee on shrimp imports, which grew to 50% for India, America’s largest overseas source of shrimp. Further levies were imposed on Ecuador, Vietnam and Indonesia, which are other major U.S. suppliers.

Views of the 47th president, from the ground up

Tariffs may slow economic growth, discombobulate markets and boost inflation. Trump’s single-handed approach to tax-and-trade policy has landed him before the Supreme Court, which is expected to rule by summer on a major test case of presidential power.

Blanchard snacks on a bag of dried shrimp.

But for Blanchard, those tariffs have been a lifeline. He’s seen a significant uptick in prices, from as low as 87 cents a pound for wild-caught shrimp to $1.50 or more. That’s nowhere near the $4.50 a pound, adjusted for inflation, that U.S shrimpers earned back in the roaring 1980s, when shrimp was less common in home kitchens and something of a luxury item.

It’s enough, however, for Blanchard to shelve his retirement plans and for that — and Trump — he’s appreciative.

“Writing all the bills in the world is great,” he said of efforts by congressional lawmakers to prop up the country’s dwindling shrimp fishermen. “But it don’t get nothing done.”

Trump, Blanchard said, has delivered.

::

Shrimp is America’s most popular seafood, but that hasn’t buoyed the U.S. shrimp industry.

Wild-caught domestic shrimp make up less than 10% of the market. It’s not a matter of quality, or overfishing. A flood of imports — farmed on a mass scale, lightly regulated by developing countries and thus cheaper to produce — has decimated the market for American shrimpers.

In the Gulf and South Atlantic, warm water shrimp landings — the term the industry uses — had an average annual value of more than $460 million between 1975 and 2022, according to the Southern Shrimp Alliance, a trade group. (Those numbers are not adjusted for inflation.)

A boat moves up a canal in Chauvin, La.

Over the last two years, the value of the commercial shrimp fishery has fallen to $269 million in 2023 and $256 million in 2024.

As the country’s leading shrimp producer, Louisiana has been particularly hard hit. “It’s getting to the point that we are on our knees,” Acy Cooper, president of the Louisiana Shrimp Assn., recently told New Orleans television station WVUE.

In the 1980s, there were more than 6,000 licensed shrimpers working in Louisiana. Today, there are fewer than 1,500.

Blanchard can see the ripple effects in Houma — in the shuttered businesses, the depleted job market and the high incidence of drug overdoses.

Latrevien Moultrie, 14, fishes in Houma, La.

“It’s affected everybody,” he said. “It’s not only the boats, the infrastructure, the packing plants. It’s the hardware stores. The fuel docks. The grocery stores.”

Two of the Blanchardses’ three children have moved away, seeking opportunity elsewhere. One daughter is a university law professor. Their son works in logistics for a trucking company in Georgia. Their other daughter, who lives near the couple, applies her advanced degree in school psychology as a stay-at-home mother of five.

(Cheri Blanchard, 64 and retired from the state labor department, keeps the books for her husband.)

It turns out the federal government is at least partly responsible for the shrinking of the domestic shrimp industry. In recent years, U.S. taxpayers have subsidized overseas shrimp farming to the tune of at least $195 million in development aid.

Seated at their dining room table, near a Christmas tree and other remnants of the holidays, Blanchard read from a set of scribbled notes — a Bible close at hand — as he and his wife decried the lax safety standards, labor abuses and environmental degradation associated with overseas shrimp farming.

James Blanchard and his wife, Cheri, like Trump’s policies. His personality is another thing.

The fact their taxes help support those practices is particularly galling.

“A slap in the face,” Blanchard called it.

::

Donald Trump grew slowly on the Blanchards.

The two are lifelong Republicans, but they voted for Trump in 2016 only because they considered him less bad than Hillary Clinton.

Once he took office, they were pleasantly surprised.

They had more money in their pockets. Inflation wasn’t an issue. Washington seemed less heavy-handed and intrusive. By the time Trump ran for reelection, the couple were fully on board and they happily voted for him again in 2024.

Republican National Committee reading material sits on the counter of James Blanchard’s kitchen.

Still, there are things that irk Blanchard. He doesn’t much care for Trump’s brash persona and can’t stand all the childish name-calling. For a long time, he couldn’t bear listening to Trump’s speeches.

“You didn’t ever really listen to many of Obama’s speeches,” Cheri interjected, and James allowed as how that was true.

“I liked his personality,” Blanchard said of the former Democratic president. “I liked his character. But I didn’t like his policies.”

It’s the opposite with Trump.

Unlike most politicians, Blanchard said, when Trump says he’ll do something he generally follows through.

Such as tightening border security.

“I have no issue at all with immigrants,” he said, as his wife nodded alongside. “I have an issue with illegal immigrants.” (She echoed Trump in blaming Renee Good for her death last week at the hands of an ICE agent.)

“I have sympathy for them as families,” Blanchard went on, but crossing the border doesn’t make someone a U.S. citizen. “If I go down the highway 70 miles an hour in that 30-mile-an-hour zone, guess what? I’m getting a ticket. … Or if I get in that car and I’m drinking, guess what? They’re bringing me to jail. So what’s the difference?”

Between the two there isn’t much — apart from Trump’s “trolling,” as Cheri called it — they find fault with.

Blanchard hailed the lightning-strike capture and arrest of Venezuelan President Nicolás Maduro as another example of Trump doing and meaning exactly what he says.

“When Biden was in office, they had a $25-million bounty on [Maduro’s] head,” Blanchard said. “But apparently it was done knowing that it was never going to be enforced.”

More empty talk, he suggested.

Just like all those years of unfulfilled promises from politicians vowing to rein in foreign competition and revive America’s suffering shrimping industry.

James Blanchard aboard his boat, which he docks in Bayou Little Caillou.

Trump and his tariffs have given Blanchard back his livelihood and for that alone he’s grateful.

There’s maintenance and repair work to be done on his boat — named Waymaker, to honor the Lord — before Blanchard musters his two-man crew and sets out from Bayou Little Caillou.

He can hardly wait.

Protests are intensifying in Iran as a deepening economic crisis fuels public anger over soaring prices and falling living standards. Here’s a breakdown of what’s driving the unrest and how authorities are responding.

Protests about the soaring cost of living in Iran have entered their sixth day after the rial plunged to a record low against the United States dollar in late December.

After a number of deaths as a result of clashes between protesters and security services, the government of President Masoud Pezeshkian appealed for unity and blamed economic pressure on what he said are Tehran’s “enemies”. Despite government promises to enact economic reforms and put more effort into tackling corruption, the protests have continued.

So far, at least seven people have been killed and 44 people have been arrested since shopkeepers in Tehran first shuttered their businesses on Sunday to protest against Iran’s economic crisis.

The tide of protest has continued to rise with economic demonstrations morphing into political protests as unrest has spread across the country.

How significant is the current round of protests, how real are the protesters’ grievances and where might this end? Here are five things you should know:

Worries about the cost of living are very real

Iran is one of the most sanctioned countries in the world. A range of international restrictions means that Tehran is struggling to access international financial markets and frozen foreign assets. The country’s increasing reliance on imports is exacerbating the situation and fuelling inflation.

On Sunday, the Iranian rial dropped to 1.42 million against the US dollar – a 56 percent drop in value in just six months. The plummeting currency has driven inflation with food prices soaring by an average of 72 percent compared with last year.

“If only the government, instead of just focusing on fuel, could bring down the price of other goods,” taxi driver Majid Ebrahimi told Al Jazeera. “The prices of dairy products have gone up six times this year and other goods more than 10 times.”

These protests are large

What began as a single protest about the collapse of the Iranian economy by shopkeepers in Tehran’s Grand Bazaar on Sunday had spread to 17 of Iran’s 31 provinces by New Year’s Eve with students and demonstrators from across Iranian society joining the wave of demonstrations.

Thousands of people have mobilised across the country with security forces responding forcefully in some places.

On Thursday, Iran’s semiofficial Fars news agency reported that three people had died in confrontations between security forces and protesters in Lordegan in southwestern Iran. A further three deaths were reported in Azna and another in Kouhdasht, both in central Iran.

“Some protesters began throwing stones at the city’s administrative buildings, including the provincial governor’s office, the mosque, the Martyrs Foundation, the town hall and banks,” Fars reported of protests in Lordegan, adding that police had responded with tear gas.

It’s hard to know how the government will respond

Tehran’s previous hardline responses to public unrest have been marked by the deaths of protesters. However, so far, despite a number of isolated clashes between protesters and security forces, Pezeshkian’s government has held back from an outright crackdown and appears ready to listen to the “legitimate demands” of protesters.

In an effort to address protesters’ concerns, the government appointed a new governor of the central bank on Wednesday. Abdolnaser Hemmati has pledged to restore economic stability after the rial’s dramatic collapse.

On Tuesday, the Ministry of Higher Education removed campus security managers from the University of Tehran and two other major universities. Local media reported that their removal was due to “a record of misconduct and failure to properly handle recent student protests”.

Speaking at a ceremony in Tehran on Thursday to mark the assassination of senior Islamic Revolutionary Guard Corps commander Qassem Soleimani in a US drone attack five years ago, Pezeshkian also took the opportunity to emphasise his government’s commitment to economic reforms and addressing corruption.

“We are determined to eradicate all forms of rent-seeking, smuggling and bribery,” he told attendees. “Those who benefit from these rents will resist and try to create obstacles, but we will continue on this path.”

“We must all stand together to solve the people’s problems and defend the rights of the oppressed and the underprivileged,” he added.

Protecting people’s livelihoods is a “red line” for his government, he declared.

Mass protests have happened before

Mass protests erupted across Iran in 2022 after the death in custody of 22-year-old Mahsa Amini, who was arrested in September that year for not wearing her hijab correctly.

Demonstrations first broke out after Amini’s funeral in the western city of Saqqez when women ripped off their headscarves in solidarity with the dead woman before they spread across much of the country.

Iran’s brutal response to the unrest involved the arbitrary arrest of tens of thousands of people, the extensive use of tear gas, the firing of live ammunition and, according to human rights organisations, the unlawful deaths of hundreds of people.

A 2024 investigation by United Nations experts into the government’s response found that its actions amounted to “crimes against humanity”, a claim rejected by authorities in Tehran as “false” and “biased”.

The so-called morality police were briefly suspended in December 2022 after the protests before being reinstated the following year. However, their enforcement of dress codes has since become notably more relaxed although many women still fear a resurgence.

These protests could escalate

On Thursday, US President Donald Trump – who in 2018 unilaterally withdrew the US from a nuclear deal with Iran that limited Iran’s nuclear development in return for sanctions relief – commented on the unrest. He posted on his Truth Social platform: “If Iran shots [sic] and violently kills peaceful protesters, which is their custom, the United States of America will come to their rescue. We are locked and loaded and ready to go.”

On Thursday, the Israeli Ministry of Foreign Affairs posted on its Farsi social media account pre-revolutionary Iranian images of a lion and a sun with the lion’s paw resting on an hourglass featuring the country’s current flag. The post read: “The rise of Iranian lions and lionesses to fight against darkness”, continuing: “Light triumphs over darkness.”

In June, Israel and the US launched attacks on Iran during a 12-day war between Iran and Israel.

While that conflict ended with what the US claimed was a decisive strike on Iran’s nuclear facilities, speculation that Israel has been readying itself for further strikes has continued.

This week, the US news website Axios reported that Trump and Israeli Prime Minister Benjamin Netanyahu discussed further strikes on Iran as well as potentially targeting Tehran’s Lebanese ally Hezbollah.

Responding on social media, Pezeshkian wrote: “Answer of Islamic Republic of Iran to any cruel aggression will be harsh and discouraging.”

Iranian president seeks to calm tensions, acknowledging protesters’ ‘legitimate’ grievances over inflation.

At least five people have been killed as demonstrations over the soaring cost of living in Iran spread to more parts of the country.

At least three people were killed and 17 others were injured at protests in the city of Azna in Lorestan province, some 300km (185 miles) southwest of Tehran, Iran’s semiofficial Fars news agency reported on Thursday.

Videos shared online appeared to show objects in the street ablaze and gunfire echoing as people shouted: “Shameless! Shameless!”

Earlier, Fars said two people were killed during protests in the city of Lordegan, about 470km (290 miles) south of the capital Tehran in the Chaharmahal and Bakhtiari province.

“Some protesters began throwing stones at the city’s administrative buildings, including the provincial governor’s office, the mosque, the Martyrs’ Foundation, the town hall and banks,” Fars said, adding that police responded with tear gas.

Online videos showed demonstrators gathered on a street, with the sound of gunfire in the background.

Earlier on Thursday, Iranian state television also reported that a member of security forces was killed overnight during protests in the western city of Kouhdasht.

“A 21-year-old member of the Basij from the city of Kouhdasht was killed last night by rioters while defending public order,” the channel said, quoting Said Pourali, the deputy governor of Lorestan province.

The Basij are a volunteer force linked to the Islamic Revolutionary Guard Corps (IRGC).

The reports come days after shopkeepers began protesting on Sunday over the government’s handling of a currency slide and rapidly rising prices.

The unrest comes at a critical moment for Iran as Western sanctions hammer an economy hit by 40 percent inflation, and after air strikes by Israel and the United States in June targeted the country’s nuclear infrastructure and military leadership.

Reporting from Tehran, Al Jazeera’s Tohid Asadi explained that the government has taken a more cautious approach to this week’s protests than it did to previous demonstrations.

“The government says it’s working hard to find a solution, to deal with the economic hardships that people are feeling,” Asadi said.

Iran last saw mass demonstrations in 2022 and 2023 after the death of Mahsa Amini, a 22-year-old woman who died in police custody after being arrested for allegedly violating the country’s strict dress code for women.

The latest protests began peacefully in Tehran and spread after students from at least 10 universities joined in on Tuesday.

Iranian President Masoud Pezeshkian has sought to calm tensions, acknowledging protesters’ “legitimate demands” and calling on the government to take action to improve the economic situation.

“From an Islamic perspective … if we do not resolve the issue of people’s livelihoods, we will end up in hell,” Pezeshkian said at an event broadcast on state television.

Government spokesperson Fatemeh Mohajerani said on Thursday the authorities would hold a direct dialogue with representatives of trade unions and merchants, without providing details.

Still, the authorities have promised to take a “firm” stance and warned against exploiting the situation to sow chaos.

“Any attempt to turn economic protests into a tool of insecurity, destruction of public property, or implementation of externally designed scenarios will inevitably be met with a legal, proportionate and decisive response,” Iran’s prosecutor general said on Wednesday.

Meanwhile, the Tasnim news agency on Wednesday evening reported the arrests of seven people it described as being affiliated with “groups hostile to the Islamic Republic based in the United States and Europe”.

Iran is in the middle of an extended weekend, with the authorities declaring Wednesday a bank holiday at the last minute, citing the need to save energy due to cold weather.

Move comes nearly two decades after the Balkan country entered the EU as hope for stability clashes with fear of rising prices.

Bulgaria has officially adopted the euro, becoming the 21st country to join the single currency nearly two decades after entering the European Union, a move that has led to both celebration and anxiety.

At midnight on Wednesday (22:00 GMT), the Balkan country abandoned the lev, its national currency since the late 19th century.

Images of Bulgarian euro coins lit up the central bank’s headquarters in Sofia as crowds gathered in freezing temperatures to mark the new year.

“I warmly welcome Bulgaria to the euro family,” said Christine Lagarde, the president of the European Central Bank.

Some residents welcomed the change with optimism. “Great! It works!” said Dimitar, 43, speaking to The Associated Press after withdrawing 100 euros from a cash machine shortly after midnight.

Successive Bulgarian governments have backed euro adoption, arguing it would strengthen the country’s fragile economy, anchor it more firmly within Western institutions and shield it from what officials describe as Russian influence. Bulgaria, with a population of about 6.4 million, remains the poorest member of the EU.

Divided public

Yet public opinion has long remained split. Many Bulgarians fear the euro will drive up prices while wages stagnate, worsening living standards in a country already struggling with political instability.

In a televised address before midnight, President Rumen Radev described the euro as the “final step” in Bulgaria’s integration into the EU.

However, he criticised the absence of a public referendum on the decision.

“This refusal was one of the dramatic symptoms of the deep divide between the political class and the people, confirmed by mass demonstrations across the country,” Radev said.

Bulgaria recently plunged into further uncertainty after anticorruption protests toppled a conservative-led government in December, pushing the country towards its eighth election in five years.

“People are afraid that prices will rise, while salaries will remain the same,” a woman in her 40s told the AFP news agency in Sofia.

At city markets, vendors listed prices in both levs and euros. Not everyone was worried.

“The whole of Europe has managed with the euro, we’ll manage too,” retiree Vlad said.

Bulgaria is saying goodbye to the lev and officially adopting the euro, but some citizens worry that shops will round up when changing currencies, making everything more expensive. Al Jazeera’s Aksel Zaimovic explains their concerns.

Tehran, Iran – Iran’s currency has been registering new lows amid ongoing economic turmoil that is also reflected in a planned budget for next year that effectively shrinks public spending.

Each United States dollar was priced at about 1.36 million rials in the open market on Wednesday in Tehran, its highest rate ever, before the Iranian currency slightly regained ground on Thursday.

The embattled national currency has been rapidly declining over recent weeks as the US and its Western allies pile on their sanctions and diplomatic pressure, and the threat of another war with Israel lingers.

President Masoud Pezeshkian this week sent his administration’s finalised proposed budget to the hardline-dominated parliament for the upcoming Iranian calendar year, which starts in late March. The budget will then have to be greenlit by the 12-member Guardian Council before being ratified into law in the coming weeks.

The presented budget nominally grew by just over 5 percent compared with last year, but inflation currently stands at about 50 percent – indicating that the government envisions lower spending while managing a so-called “resistance economy” as it faces a massive budget crunch yet again.

But minimum wages are to be raised far below the inflation rate, too, at only 20 percent, meaning that Iranians are once more guaranteed to have far less spending power next year as the embattled national currency sinks.

At the same time, the budget says the government sees taxes rising by a massive 62 percent next year, as authorities try to gradually decrease dependence on oil revenues amid US efforts to drive down Iranian exports, which are carried by a shadow fleet of ships mostly to China.

At the current exchange rate, the whole budget is worth about $106bn, several times lower than the projected 2026 budgets of regional players like Turkiye, Saudi Arabia and Israel.

Iran’s rent-distributing multi-tier exchange rate system is still at play, with the government proposing allocating a rate for customs duties, import valuation and budget accounting tables, and another closer to the open market rate used for oil revenue realisation.

An earlier subsidised exchange rate, which was far lower than the open market rate, has now been abandoned. Any excess cash resulting from this is expected to be doled out to low-income Iranians in the form of electronic coupons that can be used to buy essential items like food.

For the first time, the budget is drafted in new rials as four zeros are expected to be removed from the ailing national currency by the time the budget is operational for next year.

After years of back and forth, the parliament in October approved the government plan to lop off four zeros. The move is only cosmetic and will not help with the runaway inflation, but proponents argued it was necessary after years of currency devaluation.

Budget spells grim outlook

Several major factors have already been raising alarm over how bad the economic situation could become next year.

Iranians online reacted poorly to the fact that the government predicts wages will be far outpaced by inflation and tax collection. Others were concerned that eliminating the subsidised rate for essential goods could cause another price shock in the short term.

Many shared a video of Pezeshkian from last year running for president, when he said during a televised interview that the stark disparity between wage increases and inflation is a “grave injustice” being done to the Iranian people.

“Unfortunately, so long as we do not resolve the structural issues, we are making labourers and government workers poorer by the day while those with money get bigger and bigger,” Pezeshkian said at the time.

“This inflation is an additional tax on the poor and the disenfranchised.”

But successive governments have failed to eliminate budget deficits or rein in banks teetering on the brink of insolvency, therefore relying on the central bank to print more money to run the country and, in turn, exacerbate inflation.

Earlier in December, the government proceeded with increasing the price cap of petroleum despite repeated assurances it had no plans to that effect this year. The move has already led to increased transport costs, which will end up taking inflation higher.

There are now four price tiers for petroleum, with the cheapest and lowest quality that is available to most Iranians costing up to 50,000 rials per litre (about $1.19) and higher quality imported fuel delivered this week at 800,000 rials per litre ($19).

Hamid Pourmohammadi, who heads the Plan and Budget Organization of Iran, insisted that the government has devised a 20-point plan to be unveiled soon that will reduce pressure on the livelihoods of Iran’s 90 million population.

“The government is trying to adopt an active approach to address the economic challenges of the people, businesses and economists, so there is no perception of complacency in these economic conditions,” he said.