Iran inflation falls slightly to 9.4 pct - cen bank

TEHRAN, July 3 Sat Jul 3, 2010 9:33am BST

TEHRAN, July 3 (Reuters) - Iran's inflation level fell to 9.4 percent in June, from 9.9 percent in the previous month, its central bank governor said on Saturday.

Mahmoud Bahmani told state broadcaster IRIB that Iran aimed to bring inflation down to between 4 and 5 percent, but he did not give a timeframe.

Any such ambition is likely to be challenged by a phase-out of state subsidies for staples such as food and fuel which is due to begin in September, something which could have a significant inflationary impact. [ID:nLDE64Q08S]

The Iranian economy also faces potential harm from a new wave of sanctions -- from the United Nations, the European Union and the United States -- aimed at curbing Tehran's nuclear programme. [ID:nLDE65R1DH]

The U.S. sanctions in particular could restrict Iran's ability to import gasoline -- for which the major crude producer lacks sufficient refining capacity. Gasoline prices are fixed and subsidised, but are likely to rise when subsidies are phased out.

The success of the subsidy reform will be a major test for President Mahmoud Ahmadinejad, who has made it one of his key policies. A hike in inflation could be politically damaging, analysts say. (Reporting by Ramin Mostafavi; writing by Robin Pomeroy; Editing by Sugita Katyal)