Key facts
- Iran's Consumer Price Index (CPI) rose 88.6% year-on-year for May-June 2026.
- The rial has depreciated significantly against the US dollar, influenced by regional conflicts and threats.
- Lower-income households and rural areas are disproportionately affected by inflation.
- Food prices have more than doubled year-on-year, with significant increases across other categories.
- The IMF forecasts Iran's annual inflation to average 68.9% in 2026 and a GDP contraction of 6.1%.
Iran is experiencing one of its most severe inflation episodes in decades, with the Consumer Price Index (CPI) rising 88.6% year-on-year for the period May-June 2026, according to the Statistical Centre of Iran (SCI). This rapid price growth is attributed to a combination of long-standing structural economic challenges, weak management, fiscal and monetary imbalances, and the impact of international sanctions. Recent military conflicts and heightened regional tensions have further strained the economy by increasing investment risks and disrupting activity.
The Central Bank of Iran (CBI) reported a slightly lower year-on-year inflation rate of 83.1% for the same period, with discrepancies attributed to differing methodologies. Despite these statistical variations, both figures indicate a persistent inflationary trend.
Inflationary pressures have intensified significantly, with year-on-year inflation climbing from 52.6% in December 2025 to 88.6% by May-June 2026. The International Monetary Fund (IMF) forecasts Iran's annual inflation to average 68.9% in 2026 and projects a contraction in real GDP of 6.1%.
The surge in inflation is closely linked to the sharp depreciation of the Iranian rial. The exchange rate has fluctuated significantly due to regional conflicts, threats of air strikes, and subsequent economic activity changes. For instance, the US dollar traded at approximately 1.35 million rials at the start of the year, rising to 1.9 million rials after economic activity resumed following a ceasefire, before settling around 1.7 million rials amid renewed tensions.
Inflation has had an uneven impact, with rural areas experiencing higher year-on-year inflation (108.1%) compared to urban areas (85.2%). This disproportionately affects lower-income households, which spend a larger portion of their income on essential goods. Food prices have more than doubled, with significant increases also seen in tobacco, meat, dairy, bread, furniture, and transport costs.