Ahmadinejad decided to cut state bank interest rates to 12 percent from 14 percent and rates at private banks to 12 percent from 17 percent, state television reported.

"With the president"s final decision, the interest rates in state banks were cut by two percent and by five percent in private banks," government spokesman Gholamhossein Elham was quoted as saying. "The interest rate was set at 12 percent so that different groups of people can use bank facilities and real competition is increased between state and private banks."

Iran"s Central Bank said this week that inflation is set to rise to 17 percent in the current Iranian year to March 20 -- marking a 3.5 percentage point rise from the previous year.

PIN/AFP