The Central Bank of Iran (CBI) raised bank deposit rates and froze the accounts of hundreds of foreign exchange dealers on 15 February in an attempt to stem the recent slide in the black market exchange rate of the Iranian rial (IRR). During 2017, the official exchange rate of the IRR against the USD fell by -11% while the black market rate declined by just -2% so that the gap between the two rates narrowed from 25% at end-2016 to 15% at end-2017. However, the exchange rate regime has come under considerable pressures since the start of this year and the black market value of the IRR fell by -18% from end-2017 to mid-February, reaching an all-time low of IRR49,000 per USD1 on 14 February. And since the CBI devalued the official rate by only -3% over the same period, the gap between the two rates widened again to 32%. Although the black market rate has regained some +8% over the past week, we expect further exchange rate volatility over the course of this year.