Breaking News
Investing Pro 0
🚨 Our Pro Data Reveals the True Winner of Earnings Season Access Data

Vietnam central bank to raise policy rates by 100 bps to fight inflation

Economy Oct 24, 2022 10:56AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. People go past the State Bank building, near the offices of Vietcombank and the Bank for Investment and Development of Vietnam, in central Hanoi, Vietnam November 23, 2017. REUTERS/Kham

By Khanh Vu and Phuong Nguyen

HANOI (Reuters) -Vietnam's central bank on Monday said it would raise its policy rates by 100 basis points, the second increase in a month, in a move to head off inflation risks, maintain stability and protect its banking system.

Effective Tuesday, the refinancing rate will be increased to 6.0% and the discount rate to 4.5%, the State Bank of Vietnam (SBV) said in a statement.

Like most of its neighbours, Vietnam has faced upward pressure on inflation and has seen its currency take a hit in recent months, with the dong losing 9% against the dollar this year.

The central bank said global inflation remains high and the U.S. Federal Reserve had raised its rates five times recently, with more hikes expected this year and in 2023.

"This, coupled with the strengthening of the dollar, has put pressure on domestic interest rates and exchange rate," SBV said in the statement late on Monday.

Prime Minister Pham Minh Chinh last week said Vietnam would keep prices in check and pursue flexible, prudent monetary policy throughout next year as high energy prices and global supply issues add to inflationary pressure.

Vietnam's main stock index earlier on Monday hit its lowest level since January 2020 and closed down 3.3%, recovering slightly from a 4.1% fall earlier. The dong slumped to a fresh record low for a 13th consecutive session in earlier trade.

The SBV said it would closely monitor local and overseas markets "to timely manage" measures and monetary tools.

It said it was willing to intervene in monetary and foreign currency markets "to meet financial institutions' liquidity needs".

DEPOSIT RATES

The SBV said it would also raise the cap on dong deposit rates at commercial banks by 50 bps to 100 bps depending on

maturities.

Market analysts had earlier said faster-than-expected gross domestic product growth for this year has offered the central bank some room to raise its policy rates.

The government has said GDP growth could reach 8% this year, above the 6.0%-6.5% target and faster than the 2.58% growth of 2021.

Consumer prices in September rose 4.01% from the end of last year, close to the targeted 4.0% for the year.

The central bank on Oct. 17 widened the exchange rate trading band to 5.0% from 3.0%, following a sharp fall in the dong currency resulting from fluctuations in the global market.

Can Van Luc, an advisor to the government and an economist at the Bank for Investment and Development of Vietnam, said the rate hike was also "aimed at preventing further erosion of the country's foreign reserves", a view shared with several other economists.

Vietnam does not regularly disclose the value of its foreign reserves, which have risen steadily over the past decade, reaching $100 billion by the end of last year, an SBV deputy governor said.

The SBV has recently been forced to sell dollars to the market to support the dong currency. Some market analysts estimate about $20 billion has been sold this year.

Vietnam central bank to raise policy rates by 100 bps to fight inflation
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Mitchel Pioneer
Mitchel Pioneer Oct 24, 2022 10:02AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Greatest financial fraud in history, and biggest investment joke in the world.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email